Weatherford International plc 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PAGE Reports of Independent Registered Public Accounting Firm 43 Consolidated Statements of Operations for the year ended December 31, 2020 and the period from December 14, 2019 through December 31, 2019 (Successor periods), and for the period from January 1, 2019 through December 13, 2019 and the year ended December 31, 2018 (Predecessor periods) 46 Consolidated Statements of Comprehensive Income (Loss) for the year ended December 31, 2020 and the period from December 14, 2019 through December 31, 2019 (Successor periods), and for the period from January 1, 2019 through December 13, 2019 and the year ended December 31, 2018 (Predecessor periods) 47 Consolidated Balance Sheets as of December 31, 2020 and 2019 48 Consolidated Statements of Shareholders’ Equity (Deficiency) for the year ended December 31, 2020 and the period from December 14, 2019 through December 31, 2019 (Successor periods), and for the period from January 1, 2019 through December 13, 2019 and the year ended December 31, 2018 (Predecessor periods) 49 Consolidated Statements of Cash Flows for the year ended December 31, 2020 and the period from December 14, 2019 through December 31, 2019 (Successor periods), and for the period from January 1, 2019 through December 13, 2019 and the year ended December 31, 2018 (Predecessor periods) 50 Notes to Consolidated Financial Statements 51 Financial Statement Schedule II: Valuation and Qualifying Accounts and Allowances 106 Weatherford International plc – 2020 Form 10-K | 42 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Weatherford International plc: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Weatherford International plc and subsidiaries (the Company) as of December 31, 2020 and December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficiency), and cash flows for the year ended December 31, 2020 and for the period from December 14, 2019 to December 31, 2019 (Successor periods), and for the period from January 1, 2019 to December 13, 2019 and for the year ended December 31, 2018 (Predecessor periods), and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the Successor and Predecessor periods, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. New Basis of Accounting As discussed in Notes 2 and 3 to the consolidated financial statements, on September 11, 2019, the United States Bankruptcy Court for the Southern District of Texas entered an order confirming the Company’s plan for reorganization under Chapter 11, which became effective on December 13, 2019. Accordingly, the accompanying consolidated financial statements have been prepared in conformity with Accounting Standards Codification Subtopic 852-10, Reorganizations , for the Successor as a new entity with assets, liabilities, and a capital structure having carrying amounts not comparable with prior periods as described in Note 3. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Long-Lived Assets As discussed in Notes 1 and 10 to the consolidated financial statements, the Company records long-lived assets at cost and reviews such assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. The Company groups individual assets at the lowest level of identifiable cash flows and performs an undiscounted cash flow analysis to identify assets or asset groups that may not be recoverable. A fair value assessment is Weatherford International plc – 2020 Form 10-K | 43 Table of Contents performed on assets or asset groups identified as not being recoverable using a discounted cash flow analysis to determine if an impairment has occurred. If an impairment has occurred, the Company recognizes a loss for the difference between the carrying amount and the fair value of the asset or asset group. The carrying value of long-lived assets as of December 31, 2020 included property, plant and equipment, net of $1,236 million, definite-lived intangible assets of $810 million, and operating lease right-of-use assets of $138 million. The Company recognized an impairment charge of $814 million for the year ended December 31, 2020. We identified the valuation of certain long-lived assets to be a critical audit matter. The significant assumptions used to determine the fair value of certain asset groups, specifically the forecasted revenues, forecasted operating margins, and the discount rate used in the estimated discounted future cash flows by asset group, were challenging to test. A high degree of subjective auditor judgment was required as changes to the significant assumptions could have a significant effect on the Company’s determination of the fair value of those asset groups. Additionally, specialized skills and knowledge were required in the assessment of the discount rate used in the valuation. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls within the Company’s long-lived asset impairment process. This included controls related to the Company’s development of the significant assumptions listed above and the determination of fair value of certain asset groups. We evaluated the reasonableness of the significant assumptions by evaluating the Company’s development of the forecasted revenues and forecasted operating margins assumptions for certain asset groups. We evaluated the forecasted revenues and forecasted operating margins by asset group by comparing to relevant historical results, changes in the business, and external industry data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in (1) evaluating the selected discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable companies and (2) developing an estimate of those asset groups’ fair values by using the Company’s cash flow assumptions and the independently developed discount rate, and comparing the results to the Company’s fair value estimate. Valuation of Goodwill As discussed in Notes 1 and 11 to the consolidated financial statements, the Company performs an impairment test for goodwill annually as of October 1 or more frequently whenever events and changes in circumstances indicate that the carrying value of a reporting unit might exceed its fair value. The fair values of reporting units are determined using a combination of the income approach and the market approach. If the carrying value of a reporting unit were to exceed its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The Company recognized an impairment loss of $239 million during the year ended December 31, 2020 reducing the carrying value of goodwill as of December 31, 2020 to $0. We identified the valuation of goodwill to be a critical audit matter. The significant assumptions used to determine the fair value of the Middle East and North Africa and the Russia, Turkmenistan and Kazakhstan reporting units, specifically the forecasted revenues, forecasted operating margins, and the discount rate used in the discounted future cash flows, were challenging to test. A high degree of subjective auditor judgment was required as changes to the significant assumptions could have a significant effect on the Company’s determination of the fair value of those reporting units. Additionally, specialized skills and knowledge were required in the assessment of the discount rate used in the valuation. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls within the Company’s goodwill impairment process. This included controls related to the Company’s development of the significant assumptions listed above and the determination of fair value of the Middle East and North Africa and the Russia, Turkmenistan and Kazakhstan reporting units. We evaluated the reasonableness of the significant assumptions by evaluating the Company’s development of the forecasted revenues and forecasted operating margins assumptions for these reporting units. We evaluated the forecasted revenues and forecasted operating margins by reporting unit by comparing to relevant historical results, changes in the business, and external industry data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in (1) evaluating the selected discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable companies and (2) developing an estimate of those reporting units’ fair values by using the Company’s cash flow assumptions and the independently developed discount rate, and comparing the results to the Company’s fair value estimate. /s/ KPMG LLP We have served as the Company’s auditor since 2013. Houston, Texas February 19, 2021 Weatherford International plc – 2020 Form 10-K | 44 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Weatherford International plc: Opinion on Internal Control Over Financial Reporting We have audited Weatherford International plc and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity (deficiency), and cash flows for the year ended December 31, 2020 and for the period from December 14, 2019 to December 31, 2019 (Successor periods) and for the period from January 1, 2019 to December 13, 2019 and for the year ended December 31, 2018 (Predecessor periods), and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 19, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Houston, Texas February 19, 2021 Weatherford International plc – 2020 Form 10-K | 45 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Ended through through Year Ended (Dollars and shares in millions, except per share amounts) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Revenues: Products $ 1,435 $ 111 $ 1,819 $ 2,051 Services 2,250 150 3,135 3,693 Total Revenues 3,685 261 4,954 5,744 Costs and Expenses: Cost of Products 1,257 100 1,685 1,887 Cost of Services 1,550 108 2,168 2,627 Research and Development 97 7 136 139 Selling, General and Administrative 837 45 895 894 Impairments and Other Charges 1,236 — 1,104 2,155 Restructuring Charges 206 — 189 126 Prepetition Charges — — 86 — Gain on Sale of Operational Assets ( 12 ) — ( 15 ) — Gain on Sale of Businesses, Net — — ( 112 ) — Total Costs and Expenses 5,171 260 6,136 7,828 Operating Income (Loss) ( 1,486 ) 1 ( 1,182 ) ( 2,084 ) Other Income (Expense): Reorganization Items ( 9 ) ( 4 ) 5,389 — Interest Expense, Net ( 266 ) ( 12 ) ( 362 ) ( 614 ) Other Expense, Net ( 53 ) — ( 26 ) ( 59 ) Income (Loss) Before Income Taxes ( 1,814 ) ( 15 ) 3,819 ( 2,757 ) Income Tax Provision ( 85 ) ( 9 ) ( 135 ) ( 34 ) Net Income (Loss) ( 1,899 ) ( 24 ) 3,684 ( 2,791 ) Net Income Attributable to Noncontrolling Interests 22 2 23 20 Net Income (Loss) Attributable to Weatherford $ ( 1,921 ) $ ( 26 ) $ 3,661 $ ( 2,811 ) Basic and Diluted Loss Per Share Attributable to Weatherford $ ( 27.44 ) $ ( 0.37 ) $ 3.65 $ ( 2.82 ) Basic and Diluted Weighted Average Shares Outstanding 70 70 1,004 997 The accompanying notes are an integral part of these consolidated financial statements. Weatherford International plc – 2020 Form 10-K | 46 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Net Income (Loss) $ ( 1,899 ) $ ( 24 ) $ 3,684 $ ( 2,791 ) Foreign Currency Translation ( 38 ) 7 52 ( 240 ) Defined Benefit Pension Activity ( 14 ) 2 ( 11 ) 12 Interest Rate Derivative Loss — — 8 — Other — — — 1 Other Comprehensive Income (Loss) ( 52 ) 9 49 ( 227 ) Comprehensive Income (Loss) ( 1,951 ) ( 15 ) 3,733 ( 3,018 ) Comprehensive Income Attributable to Noncontrolling Interests 22 2 23 20 Comprehensive Income (Loss) Attributable to Weatherford $ ( 1,973 ) $ ( 17 ) $ 3,710 $ ( 3,038 ) The accompanying notes are an integral part of these consolidated financial statements. Weatherford International plc – 2020 Form 10-K | 47 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (Dollars and shares in millions, except par value) 2020 2019 Assets: Cash and Cash Equivalents $ 1,118 $ 618 Restricted Cash 167 182 Accounts Receivable, Net of Allowance for Credit Losses of $ 32 at December 31, 2020 and $ 0 at December 31, 2019 826 1,241 Inventories, Net 717 972 Other Current Assets 349 440 Total Current Assets 3,177 3,453 Property, Plant and Equipment, Net of Accumulated Depreciation of $ 367 at December 31, 2020 and $ 25 at December 31, 2019 1,236 2,122 Goodwill — 239 Intangible Assets, Net of Accumulated Amortization of $ 173 at December 31, 2020 and $ 9 at December 31, 2019 810 1,114 Operating Lease Right-of-Use Assets 138 256 Other Non-current Assets 73 109 Total Assets $ 5,434 $ 7,293 Liabilities: Short-term Borrowings and Current Portion of Long-term Debt $ 13 $ 13 Accounts Payable 325 585 Accrued Salaries and Benefits 297 270 Income Taxes Payable 185 205 Current Portion of Operating Lease Liabilities 71 79 Other Current Liabilities 471 520 Total Current Liabilities 1,362 1,672 Long-term Debt 2,601 2,151 Operating Lease Liabilities 177 213 Other Non-current Liabilities 357 341 Total Liabilities 4,497 4,377 Shareholders’ Equity: Ordinary Shares - Par value $ 0.001 ; Authorized 1,356 , Issued and Outstanding 70 at December 31, 2020 and 2019 — — Capital in Excess of Par Value 2,897 2,897 Retained Deficit ( 1,947 ) ( 26 ) Accumulated Other Comprehensive Income (Loss) ( 43 ) 9 Weatherford Shareholders’ Equity 907 2,880 Noncontrolling Interests (“NCI”) 30 36 Total Shareholders’ Equity 937 2,916 Total Liabilities and Shareholders’ Equity $ 5,434 $ 7,293 The accompanying notes are an integral part of these consolidated financial statements. Weatherford International plc – 2020 Form 10-K | 48 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY) (Dollars in millions) Par Value of Issued Shares Capital In Excess of Par Value Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Shareholders’ (Deficiency) Equity Balance at December 31, 2017 (Predecessor) $ 1 $ 6,655 $ ( 5,763 ) $ ( 1,519 ) $ 55 $ ( 571 ) Net Income (Loss) — — ( 2,811 ) — 20 ( 2,791 ) Other Comprehensive Loss — — — ( 227 ) — ( 227 ) Dividends Paid to NCI — — — — ( 16 ) ( 16 ) Adoption of Accounting Standard — — ( 97 ) — — ( 97 ) Equity Awards Granted, Vested and Exercised — 52 — — — 52 Other — 4 — — ( 20 ) ( 16 ) Balance at December 31, 2018 (Predecessor) $ 1 $ 6,711 $ ( 8,671 ) $ ( 1,746 ) $ 39 $ ( 3,666 ) Net Income (Loss) — — 3,661 — 23 3,684 Other Comprehensive Income — — — 49 — 49 Dividends Paid to NCI — — — — ( 22 ) ( 22 ) Equity Awards Granted, Vested and Exercised — 22 — — — 22 Equity Awards Vested and Cancelled in Connection With the Plan — 24 — — — 24 Other Activity — — — — 2 2 Elimination of Predecessor Equity Balances ( 1 ) ( 6,757 ) 5,010 1,697 — ( 51 ) Issuance of New Ordinary Shares to Creditors in Connection with the Plan — 2,837 — — — 2,837 Issuance of New Ordinary Shares to Prior Shareholders — 29 — — — 29 Equity Value of Warrants — 31 — — — 31 Fresh Start Adjustment to NCI — — — — ( 8 ) ( 8 ) Balance at December 13, 2019 (Successor) $ — $ 2,897 $ — $ — $ 34 $ 2,931 Net Income (Loss) — — ( 26 ) — 2 ( 24 ) Other Comprehensive Income — — — 9 — 9 Balance at December 31, 2019 (Successor) $ — $ 2,897 $ ( 26 ) $ 9 $ 36 $ 2,916 Net Income (Loss) — — ( 1,921 ) — 22 ( 1,899 ) Other Comprehensive Income — — — $ ( 52 ) — ( 52 ) Dividends Paid to NCI — — — — ( 28 ) ( 28 ) Balance at December 31, 2020 (Successor) $ — $ 2,897 $ ( 1,947 ) $ ( 43 ) $ 30 $ 937 The accompanying notes are an integral part of these consolidated financial statements. Weatherford International plc – 2020 Form 10-K | 49 Table of Contents WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Cash Flows From Operating Activities: Net Income (Loss) $ ( 1,899 ) $ ( 24 ) $ 3,684 $ ( 2,791 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 503 34 447 556 Gain on Settlement of Liabilities Subject to Compromise — — ( 4,297 ) — Reorganization Items — — ( 1,161 ) — Long-lived Asset Impairments 814 — 20 151 Goodwill Impairment 239 — 730 1,917 Inventory Charges 210 — 159 80 Asset Write-Downs and Other Charges 60 — 145 62 Employee Share-Based Compensation Expense — — 46 47 Gain on Sale Businesses, Net — — ( 112 ) — Deferred Income Tax Provision (Benefit) ( 5 ) — 25 ( 79 ) Change in Operating Assets and Liabilities, Net: Accounts Receivable 378 36 ( 135 ) ( 70 ) Inventories 64 18 ( 215 ) 86 Accounts Payable ( 250 ) ( 79 ) ( 72 ) ( 90 ) Other Assets and Liabilities, Net 96 76 ( 11 ) ( 111 ) Net Cash Provided by (Used in) Operating Activities $ 210 $ 61 $ ( 747 ) $ ( 242 ) Cash Flows From Investing Activities: Capital Expenditures for Property, Plant and Equipment $ ( 154 ) $ ( 20 ) $ ( 250 ) $ ( 186 ) Acquisition of Assets Held for Sale — — — ( 31 ) Acquisitions of Businesses, Net of Cash Acquired — — — 4 Acquisition of Intangible Assets ( 4 ) ( 1 ) ( 13 ) ( 28 ) Proceeds from Divestiture of Businesses and Investments 11 7 328 257 Proceeds from Disposition of Assets 22 — 84 106 Proceeds from Bond Maturities 50 — — — Net Cash Provided by (Used in) Investing Activities $ ( 75 ) $ ( 14 ) $ 149 $ 122 Cash Flows From Financing Activities: Borrowings of Long-term Debt $ 453 $ — $ 1,600 $ 586 Borrowings on Debtor in Possession (“DIP”) Credit Agreement — — 1,529 — Repayment on DIP Credit Agreement upon Emergence — — ( 1,529 ) — Repayments of Long-term Debt ( 9 ) ( 1 ) ( 318 ) ( 502 ) Repayments of Short-term Debt, Net ( 27 ) ( 1 ) ( 347 ) 158 DIP Financing Fees and Payments on Backstop Agreement — — ( 137 ) — Deferred Consideration Payment ( 24 ) — — — Other Financing Activities, Net ( 45 ) — ( 49 ) ( 74 ) Net Cash Provided by (Used in) Financing Activities $ 348 $ ( 2 ) $ 749 $ 168 Effect of Exchange Rate Changes on Cash and Cash Equivalents 2 1 1 ( 59 ) Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash 485 46 152 ( 11 ) Cash, Cash Equivalents and Restricted Cash at Beginning of Period 800 754 602 613 Cash, Cash Equivalents and Restricted Cash at End of Period $ 1,285 $ 800 $ 754 $ 602 Supplemental Cash Flow Information Interest Paid $ 232 $ — $ 272 $ 584 Income Taxes Paid, Net of Refunds $ 79 $ 2 $ 89 $ 99 The accompanying notes are an integral part of these consolidated financial statements. Weatherford International plc – 2020 Form 10-K | 50 Table of Contents Item 8 | Notes to the Consolidated Financial Statements WEATHERFORD INTERNATIONAL PLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Organization and Nature of Operations Weatherford International plc (“Weatherford Ireland”), an Irish public limited company, together with its subsidiaries (“Weatherford,” the “Company,” “we,” “us” and “our”), is a multinational oilfield service company. Weatherford is one of the world’s leading providers of equipment and services used in the drilling, evaluation, completion, production and intervention of oil and natural gas wells. We operate in over 75 countries and have service and sales locations in oil and natural gas producing regions globally. Many of our businesses, including those of our predecessor companies, have been operating for more than 50 years. The authorized share capital of Weatherford includes 1.356 billion ordinary shares with a par value of $ 0.001 per share. The delisting of our ordinary shares from the New York Stock Exchange (“NYSE”) became effective on April 27, 2020. Our ordinary shares were deregistered under Section 12(b) of the Exchange Act on July 16, 2020. We continue to evaluate listing options and intend to relist our ordinary shares when our Board of Directors determines market conditions are appropriate. The Company intends to continue filing periodic reports with the Securities and Exchange Commission (“SEC”) on a voluntary basis. Our ordinary shares trade on the OTC Pink Marketplace under the ticker symbol “WFTLF”. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and pursuant to the rules and regulations of the SEC for annual financial information. We consolidate all wholly owned subsidiaries and controlled joint ventures. All material intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation, including those related to the adoption of new accounting standards. Prior year net income (loss) and shareholders’ equity (deficiency) were not affected by these reclassifications. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions, including those related to allowance for credit losses, inventory valuation reserves, recoverability of long-lived assets, valuation of goodwill, useful lives used in depreciation and amortization, income taxes and related valuation allowance, accruals for contingencies, actuarial assumptions to determine costs and liabilities related to employee benefit plans, and share-based compensation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. For information about our use of estimates relating to Fresh Start Accounting, refer to Note 3 – Fresh Start Accounting for further details. Bankruptcy and Fresh Start Accounting On July 1, 2019 (the “Petition Date”), Weatherford Ireland, Weatherford International Ltd. (“Weatherford Bermuda”), and Weatherford International, LLC (“Weatherford Delaware”) (collectively, “Weatherford Parties”), filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). On December 13, 2019 (“Effective Date” or “Fresh Start Reporting Date”) after all conditions to effectiveness were satisfied, we emerged from bankruptcy after successfully completing the reorganization pursuant to the Plan. Weatherford International plc – 2020 Form 10-K | 51 Table of Contents Item 8 | Notes to the Consolidated Financial Statements During bankruptcy in 2019 we segregated liabilities and obligations whose treatment and satisfaction were dependent on the outcome of the Chapter 11 proceedings and classified these items as “Liabilities Subject to Compromise” with respect to the Predecessor (as defined below) as shown in “Note 3 – Fresh Start Accounting”. In addition, we classified all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 proceedings as “Reorganization Items” in our 2019 Consolidated Statements of Operations through the Effective Date. In accordance with ASC 852, we qualified for and adopted fresh start accounting (“Fresh Start Accounting”) on the Fresh Start Reporting Date, at which point we became a new entity for financial reporting because (i) the holders of the then existing ordinary shares of the Predecessor company received less than 50% of the new ordinary shares of the Successor company outstanding upon emergence and (ii) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. Upon adoption of Fresh Start Accounting as reflected in “Note 3 – Fresh Start Accounting,” the reorganization value derived from the enterprise value associated with the Plan was allocated to the Company’s identifiable tangible and intangible assets and liabilities based on their estimated fair values (except for deferred income taxes), with the remaining excess value allocated to Goodwill in accordance with ASC 805 – Business Combinations. Deferred income tax amounts were determined in accordance with ASC 740 – Income Taxes. The Effective Date fair values of the Company’s assets and liabilities differ materially from their recorded values as reflected on the Predecessor balance sheets. References to “Predecessor” relate to the Consolidated Statements of Operations for the period from January 1, 2019 through and including the adjustments from the application of Fresh Start Accounting on December 13, 2019 and for the year ended December 31, 2018 (“Predecessor Periods”). References to “Successor” relate to the Consolidated Balance Sheets of the reorganized Company as of December 31, 2020 and 2019 and Consolidated Statements of Operations for the year ended December 31, 2020 and for the period from December 14, 2019 through December 31, 2019 (“Successor Periods”) and are not comparable to the Consolidated Financial Statements of the Predecessor as indicated by the “black line” division in the financials and footnote tables, which emphasizes the lack of comparability between amounts presented. In addition, “Note 3 – Fresh Start Accounting” provides a summary of the Predecessor Consolidated Balance Sheet as of December 13, 2019 in the first column, and then presents adjustments to reflect the Plan and fresh start impacts to derive the opening Successor Consolidated Balance Sheet as of December 13, 2019. The Company’s financial results for periods following the application of Fresh Start Accounting will be different from historical trends and the differences may be material. Cash and Cash Equivalents We consider all highly liquid investments with original maturities of three months or less to be cash equivalents. Restricted Cash Our restricted cash balance of $ 167 million at December 31, 2020 and $ 182 million at December 31, 2019 primarily includes cash collateral for certain of our letters of credit facilities. At December 31, 2019, restricted cash also included cash escrowed for the payment of bankruptcy professional fees. Allowance for Credit Losses on Accounts Receivables We establish an allowance for credit losses based on various factors to include historical experience, current conditions and environments in which our customers operate, the aging status and reasonable and supportable forecasts. Our customer base has generally similar collectability risk characteristics, although risk profiles can vary between larger independent customers and state-owned customers, which may have a lower risk than smaller independent customers. Provisions for credit losses are recorded based on estimated losses that customer accounts are uncollectible. Major Customers and Credit Risk Substantially all of our customers are engaged in the energy industry. This concentration of customers may impact our overall exposure to credit risk, either positively or negatively, in that customers may be similarly affected by changes in economic and industry conditions. We perform periodic credit evaluations of our customers and do not generally require collateral in support of our trade receivables. We maintain allowances for credit losses. International sales also present various risks, including risks of war, civil disturbances and governmental activities that may limit or disrupt markets, restrict the movement of funds, or result in the deprivation of contract rights or the taking of property without fair consideration. Most of Weatherford International plc – 2020 Form 10-K | 52 Table of Contents Item 8 | Notes to the Consolidated Financial Statements our international sales are to large international or national oil companies and these sales may result in a concentration of receivables from such companies. As of December 31, 2020, the Eastern and Western Hemisphere accounted for 54 % and 46 %, respectively, of our total net outstanding accounts receivable on our Consolidated Balance Sheets. As of December 31, 2020, accounts receivable in Mexico and the U.S. accounted for 23 % and 12 %, respectively, of our total net outstanding account receivables. No other country accounted for more than 10% of our net outstanding accounts receivables balance. For the years ended December 31, 2020, 2019 and 2018, no individual customer accounted for more than 10 % of our consolidated revenues. Inventories We state our inventories at the lower of cost or net realizable value using either the first-in, first-out (“FIFO”) or average cost method. Cost represents third-party invoice or production cost. Production cost includes material, labor and manufacturing overhead. To maintain a carrying value that is the lower of cost or net realizable value, we regularly review inventory quantities on hand and compare to estimates of future product demand, market conditions, our production requirements, and technological developments. We maintain reserves for excess, slow moving and obsolete inventory and we may periodically recognize additional charges for inventory in which we determine there is no forecasted demand. Inventory held as of our 2019 emergence date was remeasured to fair value. Refer to Note 3 – Fresh Start Accounting for further details. Property, Plant and Equipment (“PP&E”) PP&E, both owned and under finance leases, is initially stated at cost and depreciated over its estimated life. Subsequently, PP&E is measured at cost less accumulated depreciation and impairment losses. The carrying values are based on our estimates and judgments relative to capitalized costs, useful lives and salvage value, where applicable. We expense maintenance and repairs as incurred. We capitalize expenditures for improvements as well as renewals and replacements that extend the useful life of the asset. We depreciate our fixed assets on a straight-line basis over their estimated useful lives, allowing for salvage value where applicable. The estimated useful lives of our major classes of PP&E are as follows: Major Classes of Property, Plant and Equipment PP&E Estimated Useful Lives Buildings and leasehold improvements 10 – 40 years or lease term Rental and service equipment 3 – 10 years Machinery and other 2 – 12 years PP&E held as of our 2019 emergence date was remeasured to fair value and new estimated useful lives were determined. Refer to Note 3 – Fresh Start Accounting for further details. Weatherford International plc – 2020 Form 10-K | 53 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Goodwill and Intangible Assets Goodwill represents the excess of consideration paid (or with respect to our 2019 Fresh Start Accounting, the excess of reorganization value) over the fair value of net tangible and identifiable intangible assets acquired. Goodwill is not amortized but is evaluated for impairment. When we have recognized goodwill on our consolidated balance sheet, we performed an impairment test for goodwill annually as of October 1 or more frequently whenever events and changes in the circumstances indicates that the carrying value of a reporting unit might exceed its fair value. The quantitative step of the goodwill impairment test involves a comparison of the fair value of each of our reporting units that have goodwill assigned with their carrying values. If the carrying value of a reporting unit’s goodwill were to exceed its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. With respect to the Successor and as a result of Fresh Start Accounting, our newly established identifiable intangible assets included developed technologies and our trade name. Successor identifiable intangible assets are being amortized on a straight-line basis over their estimated economic lives generally ranging from five to 10 years. As many areas of our business rely on patents and proprietary technology, we seek patent protection both inside and outside the U.S. for products and methods that appear to have commercial significance. We capitalize patent defense costs when we determine that a successful defense is probable. Long-Lived Assets Long-lived assets consisting of PP&E, intangible assets, and operating lease right-of-use assets are initially recorded at cost and reviewed whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. Factors that might indicate a potential impairment may include, but are not limited to, significant decreases in the market value of the long-lived asset or asset group, a significant change in the long-lived asset’s physical condition, the introduction of competing technologies, legal challenges, a reduction in the utilization rate of the assets, a change in industry conditions or a reduction in cash flows associated with the use of the long-lived asset. If these or other factors are present, the Company performs an undiscounted cash flow analysis to identify if the asset or asset group may not be recoverable. A fair value assessment is performed on assets or asset groups identified as not being recoverable using a discounted cash flow analysis to determine if an impairment has occurred. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset or asset group. We estimate the fair value of the asset or asset group using market prices when available or, in the absence of market prices, based on an estimate of discounted cash flows or replacement cost. Cash flows are generally discounted using an interest rate commensurate with a weighted average cost of capital for a similar asset. Long-lived assets held as of our 2019 emergence date were remeasured to fair value. Refer to Note 3 – Fresh Start Accounting for further details. Research and Development Expenditures Research and development expenditures are expensed as incurred. Derivative Financial Instruments We record derivative instruments on the balance sheet at their fair value as either assets or liabilities. Changes in the fair value of derivatives are recorded each period in current earnings. Foreign Currency Results of operations for our foreign subsidiaries with functional currencies other than the U.S. dollar are translated using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated using the exchange rates in effect at the balance sheet dates, and the resulting translation adjustments are included in “Accumulated Other Comprehensive Income (Loss)”, a component of Shareholders’ Equity (Deficiency). For our subsidiaries that have a functional currency that differs from the currency of their balances and transactions, inventories, PP&E and other non-monetary assets and liabilities, together with their related elements of expense or income, are remeasured into the functional currency using historical exchange rates. All monetary assets and liabilities are remeasured into the functional currency at current exchange rates. All revenues and expenses are translated into the functional currency at Weatherford International plc – 2020 Form 10-K | 54 Table of Contents Item 8 | Notes to the Consolidated Financial Statements average exchange rates. Remeasurement gains and losses for these subsidiaries are recognized in our results of operations during the period incurred. We record net foreign currency gains and losses on foreign currency derivatives (see “Note 16 – Derivative Instruments”) and currency devaluation charges, when incurred, in “Other Income (Expense), Net” on the accompanying Consolidated Statements of Operations. Share-Based Compensation We account for all share-based payment awards, including shares issued under restricted shares, restricted share units and performance units by measuring these awards at the date of grant and recognizing the grant date fair value as an expense, net of expected forfeitures, over the service period, which is usually the vesting period. Income Taxes We account for taxes under the asset and liability method. Income taxes have been provided based upon the tax laws and rates in the countries in which our operations are conducted and income is earned. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. The impact of an uncertain tax position taken or expected to be taken on an income tax return is recognized in the financial statements at the largest amount that is more likely than not to be sustained upon examination by the relevant taxing authority. Leases We lease certain facilities, land, vehicles, and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842). Upon adoption, operating right of use (“ROU”) assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Operating leases in effect prior to January 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of January 1, 2019. We determine if an arrangement is classified as a lease at inception of the arrangement. As most of our leases do not provide an implicit rate of return, we use our incremental borrowing rate, together with the lease term information available at commencement date of the lease, in determining the present value of lease payments, which is updated on a quarterly basis. For certain equipment leases, such as copiers and vehicles, we account for the leases under a portfolio method. Operating lease payments include related options to extend or terminate lease terms that are reasonably certain of being exercised. Upon emergence from bankruptcy on December 13, 2019, our lease liabilities were remeasured to fair value using the present value of the remaining lease payments as if we acquired new leases. The remeasurement was based on our incremental borrowing rate as of December 13, 2019. Additionally, the ROU assets were revalued based upon the present value of market-based rent. The remeasurement of our ROU assets was based on the market discount rate as of December 13, 2019. Disputes, Litigation and Contingencies We accrue an estimate of costs to resolve certain disputes, legal matters and contingencies when a loss on these matters is deemed probable and reasonably estimable. For matters not deemed probable or not reasonably estimable, we have not accrued any amounts. Our contingent loss estimates are based upon an analysis of potential results, assuming a combination of possible litigation and settlement strategies. The accuracy of these estimates is impacted by the complexity of the associated issues. Weatherford International plc – 2020 Form 10-K | 55 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Revenue Recognition We account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) , and all of the related amendments, collectively referred to as “Topic 606”. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The majority of our revenue is derived from short term contracts. Our services and products are generally sold based upon purchase orders, contracts or other legally enforceable arrangements with our customers that included fixed or determinable prices but do not generally include right of return provisions or other significant post-delivery obligations. The unmanned equipment that we lease to customers under operating leases consist primarily of drilling rental tools and artificial lift pumping equipment. These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. We include revenue from these leases within “Services Revenue” on our Consolidated Statement of Operations. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets (including unbilled receivables), and customer advances and deposits (contract liabilities classified as deferred revenues). Receivables for products and services with customers are included in “Accounts Receivable, Net,” contract assets are included in “Other Current Assets” and contract liabilities are included in “Other Current Liabilities” on our Consolidated Balance Sheets. Consideration under certain contracts such as turnkey or lump sum contracts may be classified as contract assets as the invoicing occurs once the performance obligations have been satisfied while the customer simultaneously receives and consumes the benefits provided. We also have receivables for work completed on service contracts but not billed in which the rights to consideration are conditional and would be classified as contract assets. We may also have contract liabilities and defer revenues for certain product sales that are not distinct from their installation. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Generally, our revenue is recognized for services over time as the services are rendered and we primarily utilize an output method such as time elapsed or footage drilled which coincides with how customers receive the benefit. Both contract drilling and pipeline service revenue is contractual by nature and generally governed by day-rate based contracts. Revenue is recognized on product sales at a point in time when control passes and is generally upon delivery but is dependent on the terms of the contract. Our services and products are generally sold based upon purchase orders, contracts or call-out work orders that include fixed per unit prices or variable consideration but do not generally include right of return provisions or other significant post-delivery obligations. We generally bill our sales of services and products upon completion of the performance obligation. Product sales are billed and recognized when control passes to the customer. Our products are produced in a standard manufacturing operation, even if produced to our customer’s specifications. Revenues are recognized at the amount to which we have the right to invoice for services performed. Our payment terms vary by the type and location of our customer and the products or services offered. For certain products or services and customer types, we require payment before the products or services are delivered to the customer and record as a contract liability. We defer revenue recognition on such payments until the products or services are delivered to the customer. From time to time, we may enter into bill and hold arrangements. When we enter into these arrangements, we determine if the customer has obtained control of the product by determining (a) the reason for the bill-and-hold arrangement; (b) whether the product is identified separately as belonging to the customer; (c) whether the product is ready for physical transfer to the customer; and (d) whether we are unable to utilize the product or direct it to another customer. We account for individual products and services separately if they are distinct and the product or service is separately Weatherford International plc – 2020 Form 10-K | 56 Table of Contents Item 8 | Notes to the Consolidated Financial Statements identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration, including any discounts, is allocated between separate products and services based on their standalone selling prices. The standalone selling prices are determined based on the prices at which we separately sell our products and services. For items not sold separately (e.g. term software licenses in our Completion and Production product line), we estimate standalone selling prices using the adjusted market assessment approach. Costs of relocating equipment without contracts are expensed as incurred. The nature of our contracts gives rise to several types of variable consideration, including claims and lost-in-hole charges. Our claims are not significant and lost-in-hole charges are constrained variable consideration. We do not estimate revenue associated with these types of variable consideration. Under certain contracts, we may incur rebillable expenses including shipping and handling, third-party inspection and repairs, and customs costs and duties. If reimbursable by customers we recognize the revenue associated with these rebillable expenses as “Product Revenues” and all related costs as “Cost of Products” in the accompanying Consolidated Statements of Operations. We provide certain assurance warranties on product sales which range from one to five years but do not offer extended warranties on any of our products or services. These assurance warranties are not separate performance obligations thus no portion of the transaction price is allocated to our obligations under these warranties. Earnings (Loss) per Share Basic earnings (loss) per share for all periods presented equals net income (loss) divided by the weighted average shares outstanding during the period including participating securities. Diluted earnings (loss) per share is computed by dividing net income (loss) by our weighted average shares outstanding during the period including participating securities and any potential dilutive shares, when applicable. Unvested share-based payment awards and other instruments issued by the Company that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and are included in the computation of earnings per share following the two-class method. 2. Emergence from Chapter 11 Bankruptcy Proceedings Restructuring Support Agreement; Voluntary Reorganization Under Chapter 11 of the U.S. Bankruptcy Code On May 10, 2019, the Weatherford Parties entered into the Restructuring Support Agreement (“RSA”) with certain holders of our unsecured notes (“Consenting Creditors”), setting forth, subject to certain conditions, the terms of the proposed capital financial restructuring of the Company (“Transaction”). The RSA included certain milestones for the progress of the upcoming court proceedings, which included the dates by which the Weatherford Parties were required to, among other things, obtain certain court orders and complete the Transaction. On July 1, 2019, Weatherford Ireland, Weatherford Bermuda, and Weatherford Delaware, filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas (the “Cases”). Payments Due on Certain Indebtedness The Weatherford Parties’ 7.75 % Senior Notes due 2021, 8.25 % Senior Notes due 2023 and 6.80 % Senior Notes due 2037 (together, “Certain Senior Notes”) provided for an aggregate $ 69 million interest payment that became due on June 15, 2019. The applicable indenture governing the Certain Senior Notes provided a 30-day grace period that extended the latest date for making this interest payment to July 16, 2019, before an event of default would occur under the applicable indenture. The Weatherford Parties elected to not make this interest payment on the due date and to utilize the 30-day grace period provided by the indentures. As a result of filing the Cases on July 1, 2019, an event of default occurred under each indenture governing these unsecured notes, which automatically accelerated maturity of the principal, plus any accrued and unpaid interest, on such series of unsecured notes and certain other obligations of the Weatherford Parties. Any efforts to enforce such payment obligations under the unsecured notes or other accelerated obligations of the Weatherford Parties were automatically stayed as a result of the Cases, and the creditors’ rights of enforcement in respect of the unsecured notes and other accelerated obligations of the Weatherford Parties were subject to the applicable provisions of the Bankruptcy Code. In addition, all of the Weatherford Weatherford International plc – 2020 Form 10-K | 57 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Parties’ prepetition unsecured senior notes and related unpaid interest were classified as “Liabilities Subject to Compromise” on our 2019 Consolidated Balance Sheets during bankruptcy as further defined herein and in subsequent disclosures throughout and with respect to the Predecessor as shown in “Note 3 – Fresh Start Accounting”. The Weatherford Parties’ Term Loan Agreement required a quarterly payment of $ 12.5 million plus interest that became due on June 30, 2019. On July 1, 2019, the Weatherford Parties and the Term Loan Lenders entered into a Term Loan Forbearance Agreement where the lenders agreed to forbear from exercising their rights and remedies available to them, including the right to accelerate any indebtedness, for a specified period of time. On July 3, 2019, all unpaid principal and interest under the Term Loan Agreement were repaid in full. See discussion below. Forbearance Agreements On July 1, 2019, the Weatherford Parties and the Credit Agreement Lenders under the Amended and Restated Credit Agreement (the “A&R Credit Agreement”), dated as of May 9, 2016, among WOFS Assurance Limited and Weatherford Bermuda, as borrowers, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto entered into a forbearance agreement (the “Credit Agreement Forbearance Agreement”) with respect to certain defaults under the A&R Credit Agreement, including those arising from the Weatherford Parties’ commencement of the Cases. On July 1, 2019, the Weatherford Parties and the Term Loan Lenders under the Term Loan Agreement, dated as of May 4, 2016, among Weatherford Bermuda, as borrower, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (the “Term Loan Agreement”) entered into a forbearance agreement (the “Term Loan Forbearance Agreement”) with respect to certain defaults under the Term Loan Agreement. On July 3, 2019, the Company repaid in full its outstanding indebtedness under the Term Loan. On July 1, 2019, the Weatherford Parties and the 364-Day Lenders under the 364-Day Revolving Credit Agreement, dated August 16, 2018, among Weatherford Bermuda, as borrower, the other borrowers party thereto, the Company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto (“364-Day Credit Agreement”) entered into a forbearance agreement (the “364-Day Revolving Forbearance Agreement”) with respect to certain defaults under the 364-Day Credit Agreement. On July 3, 2019, the Company repaid in full its outstanding indebtedness under the 364-Day Revolving Credit Agreement. On July 1, 2019, the Weatherford Parties and three lenders under the DIP Credit Agreement (the “Swap Counterparties”) each party to a hedging agreement with Weatherford Bermuda for the purpose of hedging foreign currency exposure incurred by the Weatherford Parties (each, a “Swap Agreement” and, collectively, the “Swap Agreements”) entered into a consent to swap agreement termination forbearance (the “Swap Forbearance Agreement”) with respect to certain defaults under the Swap Agreements. Specifically, under the Swap Forbearance Agreement, the Swap Counterparties agreed to forbear from exercising their rights and remedies available to them due to certain Events of Default and Termination Events defined in the agreements for a specified period of time. On July 3, 2019, the Weatherford Parties entered into amended and restated Swap Agreements with such Swap Counterparties to govern existing and future foreign currency transactions entered into with such Swap Counterparties. Backstop Commitment Agreement On July 1, 2019, the Weatherford Parties and the commitment parties thereto (the “Initial Commitment Parties”) entered into a Backstop Commitment Agreement. Pursuant to the terms of the Plan, and subject to approval by the Bankruptcy Court in connection with confirmation of the Plan, the Company agreed to offer to holders of its existing unsecured notes, including the Commitment Parties, subscription rights to purchase the Exit Notes in aggregate principal amount of $ 1.25 billion, upon the Company’s emergence from bankruptcy. On September 9, 2019, the Weatherford Parties, certain of the Initial Commitment Parties and certain additional commitment parties (the “Additional Commitment Parties” and, together with the Initial Commitment Parties, the “Commitment Parties”) entered into an amendment to the Backstop Commitment Agreement. The Backstop Commitment Agreement Amendment provided for (i) the joinder of the Additional Commitment Parties to the Backstop Commitment Agreement, (ii) the increase in the backstop commitment by $ 350 million (the “Increased Commitment”) from $ 1.25 billion to up to $ 1.6 billion, and (iii) an amendment to the Backstop Commitment Agreement to account for the changes reflected in the Third RSA Amendment. Subject to the terms and conditions contained in the Backstop Commitment Agreement, the Consenting Creditors agreed to purchase any Exit Notes that were not duly subscribed for pursuant to the rights offering at a price equal to $1,000 per $1,000 in Weatherford International plc – 2020 Form 10-K | 58 Table of Contents Item 8 | Notes to the Consolidated Financial Statements principal amount of the Exit Notes purchased by such Commitment Party. On July 1, 2019, as consideration for the commitment, the Weatherford Parties made an aggregate payment of $ 62.5 million in cash to the Commitment Parties. As consideration for the Increased Commitment agreed to on September 9, 2019, the Weatherford Parties made an aggregate payment of $ 18.7 million in cash to certain of the Commitment Parties upon our emergence date. Debtor in Possession Credit Agreement On July 3, 2019, the Weatherford Parties entered into a senior secured superpriority debtor in possession credit agreement (the “DIP Credit Agreement”). The DIP Credit Agreement had two debtor in possession (“DIP”) facilities to provide liquidity during the pendency of the Cases. The facilities consisted of (a) a DIP revolving credit facility in the principal amount of up to $ 750 million provided by banks or other lenders and (b) a DIP term loan facility in the amount of up to $ 1.0 billion, which was fully backstopped by the Consenting Creditors. The DIP Credit Agreement matured on the date of completion of the Transaction. On July 3, 2019, the Weatherford Parties borrowed approximately $ 1.4 billion under the DIP Credit Agreement and the proceeds were used to repay certain prepetition indebtedness, cash collateralize certain obligations with respect to letters of credit and similar instruments and finance the working capital needs and general corporate purposes of the Weatherford Parties and certain of their subsidiaries. On July 3, 2019, the Company repaid all outstanding amounts due under the secured Term Loan Agreement and 364-Day Credit Agreement totaling approximately $ 616 million with borrowings from our DIP Credit Agreement. In addition, the Company cash collateralized approximately $ 271 million of letters of credit and similar instruments with borrowings from the DIP Credit Agreement. We repaid our DIP Credit Agreement borrowings in full on the Effective Date. Amended RSA; Plan Confirmation On August 23, 2019, the Weatherford Parties entered into the second amendment of the RSA (the “Second RSA Amendment”) with certain of the noteholders, and certain equity holders who collectively held approximately 208 million shares of the Weatherford’s outstanding ordinary shares (the “Consenting Equity Holders”) which joined the Consenting Equity Holders as parties to the RSA. In addition, it provided for the payment of $ 250 thousand to the Consenting Equity Holders’ counsel and amended the terms of the new warrants to be issued under the Plan to the holders of the Company’s existing ordinary shares. The amended new warrant terms include extending the maturity date of the warrants to four years after the effective date of the Plan and reduced the exercise price. Pursuant to the terms of the Third RSA Amendment, the Weatherford Parties agreed to issue a single tranche of up to $ 2.1 billion aggregate principal amount of new unsecured notes (“Exit Notes”) upon emergence from bankruptcy, consisting of up to $ 1.6 billion of Exit Notes were issued for cash to holders of subscription rights issued in a rights offering (the “Exit Rights Offering Notes”) and to holders of Unsecured Notes Claims and $ 500 million of Exit Notes issued on a pro rata basis (the “Exit Takeback Notes”). The Exit Notes were issued in lieu of the two tranches of new unsecured notes in aggregate principal amount of $ 2.5 billion previously contemplated by the original RSA. On September 11, 2019, the Transaction was approved through the confirmation of the Plan filed in the Cases. The amended RSA and the confirmed Plan contemplated a comprehensive deleveraging of our balance sheet and provided, in pertinent part, and were executed as follows (as further described in later paragraphs): • Our existing unsecured notes were cancelled and exchanged for 99 % of the ordinary shares of the reorganized Company (“New Common Stock”) and the Weatherford Parties issued a single tranche of up to $ 2.1 billion aggregate principal amount of new Exit Notes upon emergence from bankruptcy, consisting of up to $ 1.6 billion of Exit Rights Offering Notes (fully backstopped by Commitment Parties in the Backstop Commitment Agreement) issued for cash to holders of subscription rights issued in a rights offering and $ 500 million of Exit Takeback Notes issued on a pro rata basis with a five-year maturity. • All trade claims against the Company whether arising prior to or after the commencement of the Cases were paid in full in the ordinary course of business. • Our existing equity was cancelled and exchanged for 1 % of the New Common Stock and four-year warrants to purchase 10 % of the New Common Stock, both subject to dilution on account of the equity issued pursuant Weatherford International plc – 2020 Form 10-K | 59 Table of Contents Item 8 | Notes to the Consolidated Financial Statements to the management incentive plan. The strike price of the warrants was set at an equity value at which the noteholders received a recovery equal to par as of the date of the commencement of the Cases in respect of the existing unsecured notes and all other general unsecured claims that were pari passu with the existing unsecured notes. Our affiliates entities that did not file voluntary petitions under the Bankruptcy Code continued operating their businesses and facilities without disruption to customers, vendors, partners or employees. Weatherford Bermuda commenced provisional liquidation proceedings (“Bermuda Proceedings”) pursuant to the Bermuda Companies Act 1981 by presenting a winding up petition to the Supreme Court of Bermuda (“Bermuda Court”). The Bermuda Court appointed a provisional liquidator who acted as an officer of the Bermuda Court. The appointment of the provisional liquidator provided an automatic statutory stay of proceedings in Bermuda against Weatherford Bermuda and its assets. On the return date of September 6, 2019 for the Bermuda petition - similar to a second day hearing in a Chapter 11 proceeding - Weatherford Bermuda postponed its petition for a specified period, while the Cases were administered. Before the Weatherford Parties emerged from Chapter 11, Weatherford Bermuda, along with the provisional liquidator and subject to the direction of the Bermuda Court, convened meetings of the impaired creditors in order to consider and approve, if appropriate, a scheme of arrangement pursuant to the Bermuda Companies Act 1981. The terms of the approved Bermuda scheme mirrored the terms of the Plan and was a mechanism for ensuring that all of the impaired creditors of Weatherford Bermuda were bound by the terms of the Bermuda scheme. The Bermuda Scheme was effective as of November 25, 2019. On September 23, 2019, Weatherford Ireland filed a petition under the Irish Companies Act 2014 in Ireland (“Irish Examinership Proceeding”) to seek approval for its scheme of arrangement following confirmation of the Plan in the U.S. The filing of the Irish Examinership Proceeding commenced a 100-calendar day protection period under Irish law, during which Weatherford Ireland had the benefit of protection against enforcement and other actions by its creditors. Weatherford Ireland continued operating its business in the ordinary course during the protection period. The approved terms of the Irish scheme mirrored the terms of the Plan. The Irish scheme was approved by the Irish High Court on December 12, 2019. Subject to certain exceptions, under the Bankruptcy Code, the filing of the Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Weatherford Parties or their property to recover, collect or secure a claim arising prior to the date of the Cases. In addition, all of the Weatherford Parties’ prepetition unsecured senior notes and related unpaid interest were liabilities subject to compromise, further discussed below. Since the commencement of the Cases until emergence, the Weatherford Parties continued to operate their businesses as debtors-in-possession under the jurisdiction of and in accordance with the applicable provisions of the Bankruptcy Code, orders of the Bankruptcy Court, the Irish Examinership Proceeding and the Bermuda Proceeding. Emergence On the Effective Date of December 13, 2019, except as noted below: (1) the Company amended and restated its certificate of incorporation and bylaws on December 10, 2019; (2) the Company appointed new members to the Successor’s board of directors to replace the directors of the Predecessor; (3) all outstanding obligations under our unsecured senior and exchangeable notes were cancelled and the applicable agreements governing such obligations were terminated; (4) the senior secured superpriority debtor-in-possession credit agreement (the “DIP Credit Agreement”) the Company previously entered into was paid in full and terminated; (5) the Company issued a $ 2.1 billion aggregate principal amount of unsecured 11.00 % Exit Notes due 2024; for additional details see “Note 14 – Borrowings and Other Debt Obligations”; (6) the Company entered into a senior secured asset-based revolving credit agreement in an aggregate amount of $ 450 million (the “ABL Credit Agreement ” ) with the lenders party thereto and Wells Fargo Bank, N.A. as administrative agent; for additional details see Note 14 – Borrowings and Other Debt Obligations; Weatherford International plc – 2020 Form 10-K | 60 Table of Contents Item 8 | Notes to the Consolidated Financial Statements (7) the Company entered into a senior secured letter of credit agreement in an aggregate amount of $ 195 million (the “LC Credit Agreement”) for issuance of bid and performance letters of credit; for additional details see Note 14 – Borrowings and Other Debt Obligations; (8) the Company issued 69,999,954 shares of Successor new ordinary shares (“New Ordinary Shares”) to the holders of the Company’s existing senior notes and holders of the existing ordinary shares (“Old Ordinary Shares”); for additional details see “Note 20 – Shareholders’ Equity (Deficiency)”; (9) the Company issued warrants (the “New Warrants”), to holders of the Company’s existing Old Ordinary Shares, to purchase up to an aggregate of 7,777,779 New Ordinary Shares in the Company at an exercise price of $ 99.96 per ordinary share. The New Warrants are exercisable until the earlier of December 13, 2023 and the date of consummation of any liquidity event as defined in the Warrant Agreement; for additional details see “Note 20 – Shareholders’ Equity (Deficiency)”. Prepetition Charges Expenses, gains and losses were realized or incurred before July 1, 2019 and in relation to the Cases are recorded under the caption “Prepetition Charges” on our 2019 Predecessor Consolidated Statements of Operations. The $ 86 million of prepetition charges primarily consisted of professional and other fees related to the Cases. Reorganization Items Any expenses, gains and losses that are realized or incurred as of or subsequent to the Petition Date and as a direct result of the Cases are recorded under “Reorganization Items” on our Consolidated Statements of Operations for the Predecessor and Successor Periods and consisted of the following: Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Reorganization Gain (Expense) (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 Gain on Settlement of Liabilities Subject to Compromise $ — $ — $ 4,297 Fresh Start Valuation Adjustments — — 1,434 Reorganization Items for Plan Effects (Non-Cash) — — 5,731 Unamortized Debt Issuance and Discount $ — $ — $ ( 128 ) Unamortized Interest Rate Derivative Loss — — ( 8 ) Reorganization Items (Non-Cash) — — ( 136 ) Backstop Commitment Fees $ — $ — $ ( 81 ) DIP Financing Fees — — ( 56 ) Professional Fees ( 9 ) ( 4 ) ( 69 ) Reorganization Fees ( 9 ) ( 4 ) ( 206 ) Total Reorganization Items $ ( 9 ) $ ( 4 ) $ 5,389 Reorganization Items (Fees) Unpaid $ — $ 30 $ 30 Reorganization Items (Fees) Paid $ 39 $ 4 $ 176 Weatherford International plc – 2020 Form 10-K | 61 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Liabilities Subject to Compromise The Weatherford Parties’ prepetition principal balance on the Predecessor’s unsecured Senior and Exchangeable Senior Notes and related unpaid accrued interest as of the Petition Date were reclassified from “Long-term Debt” and “Other Current Liabilities”, respectively, to “Liabilities Subject to Compromise” on our Consolidated Balance Sheets on July 2, 2019 and during the bankruptcy proceedings at the amounts that were allowed as claims by the Bankruptcy Court. See also “Note 3 – Fresh Start Accounting” for further details. Upon emergence from bankruptcy, the liabilities subject to compromise of $ 7.6 billion were cancelled and the applicable agreements governing such obligations were terminated. Predecessor December 13, (Dollars in millions) 2019 5.125 % Senior Notes due 2020 $ 365 5.875 % Exchangeable Senior Notes due 2021 1,265 7.75 % Senior Notes due 2021 750 4.50 % Senior Notes due 2022 646 8.25 % Senior Notes due 2023 750 9.875 % Senior Notes due 2024 790 9.875 % Senior Notes due 2025 600 6.50 % Senior Notes due 2036 453 6.80 % Senior Notes due 2037 259 7.00 % Senior Notes due 2038 461 9.875 % Senior Notes due 2039 250 6.75 % Senior Notes due 2040 463 5.95 % Senior Notes due 2042 375 Accrued Interest on Senior Notes and Exchangeable Senior Notes 207 Liabilities Subject to Compromise $ 7,634 The contractual interest expense on our Senior and Exchangeable Senior Notes is in excess of recorded interest expense on these notes by $ 257 million during the bankruptcy proceeding from the Petition Date until the Effective Date and was not included as interest expense on the Consolidated Statements of Operations for the Predecessor Period because the Company discontinued accruing interest subsequent to the Petition Date in accordance with ASC 852. We did not make any interest payments on Predecessor Senior and Exchangeable Senior Notes subsequent to the commencement of the Cases. Weatherford International plc – 2020 Form 10-K | 62 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 3. Fresh Start Accounting Fresh Start Accounting Upon emergence from bankruptcy, we qualified for and adopted Fresh Start Accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes because (1) the holders of the then existing common shares of the Predecessor received less than 50 percent of the new common shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims. The reorganization value derived from the range of enterprise values associated with the Plan was allocated to the Company’s identifiable tangible and intangible assets and liabilities based on their estimated fair values (except for deferred income taxes) with the remaining excess value allocated to goodwill in accordance with ASC 805 – Business Combinations. The amount of deferred income taxes recorded was determined in accordance with ASC 740 – Income Taxes. The Effective Date fair values of the Company’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheets. Reorganization Value Under ASC 852, the Successor determined a value to be assigned to the equity of the emerging entity as of the date of adoption of Fresh Start Accounting. Based on the Company’s revised projections filed with the SEC on a Form 8-K on October 7, 2019 and October 16, 2019, management and its investment bankers reassessed the value of the Company, resulting in an estimated range of enterprise value between $ 4.5 billion and $ 6.0 billion. The Company engaged third-party valuation advisors to assist in determining a point estimate of enterprise value within the range. Management concluded that the best point estimate of enterprise value was $ 4.5 billion. The Company engaged valuation experts to assist management in the allocation of such enterprise value to the assets and liabilities for financial reporting purposes based on management’s latest outlook as of the effective date. Based on this reassessment, the Company deemed it appropriate to use a final enterprise value of $ 4.5 billion for financial reporting purposes. The following table reconciles the enterprise value to the estimated fair value of our Successor common shares as of the Fresh Start Reporting Date: (Dollars in millions) Fresh Start Reporting Date Enterprise Value $ 4,516 Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19) 518 Less: Fair Value of Debt ( 2,103 ) Fair Value of Successor Equity $ 2,931 The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to the Company’s individual assets as of the Fresh Start Reporting Date: (Dollars in millions) Fresh Start Reporting Date Enterprise Value $ 4,516 Plus: Cash and Cash Equivalents (includes $25 million cash collateral released from restricted cash on 12/17/19) 518 Plus: Current Liabilities Excluding Short-term Borrowings and Current Portion of Long-term Debt 1,707 Plus: Non-current Liabilities Excluding Long-term Debt 627 Reorganization Value of Successor’s Assets to be Allocated $ 7,368 With the assistance of third-party valuation advisors, we determined the enterprise and corresponding equity value of the Successor using various valuation methods, including: (i) a calculation of the present value of future cash flows based on our financial projections, and (ii) a peer group trading analysis. The enterprise value and corresponding equity value were dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain other Weatherford International plc – 2020 Form 10-K | 63 Table of Contents Item 8 | Notes to the Consolidated Financial Statements assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the financial projections, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, upon emergence we could not assure that the estimates, assumptions, valuations or financial projections would be realized, and actual results could vary materially. Valuation Process The fair values of the Company’s principal assets, including inventory, rental and service equipment, real property, and intangible assets were estimated with the assistance of third-party valuation advisors. In addition, we also estimated the fair value of the Company’s lease liabilities, Exit Notes, and New Warrants. Inventory The fair value of the inventory was determined by using both a cost approach and income approach. Inventory was segregated into raw materials, spare parts, work in process (“WIP”), and finished goods. Fair value of raw materials and spare parts inventory were determined using the cost approach. Fair value of WIP and finished goods inventory were determined by estimating the net realizable value of the inventory, adjusted for holding period before an item is sold. Additional obsolescence assessment was performed on the estimated fair value of inventory to determine if further adjustments were necessary. Property, Plant and Equipment Land, Buildings and Leasehold Improvements The fair value of real property locations were estimated using the sales comparison (market) approach and cost approach. As part of the valuation process, the third-party advisors obtained information on the Company’s current usage, building type, year built, and history of major capital expenditures made by the Company. Certain site inspections were conducted and review of market information such as comparable sales and current listings were obtained for the Company’s largest sites. In addition, an obsolescence assessment for real property locations at the reporting unit level was reviewed to determine if adjustments to fair value estimates were needed. Rental and Service Equipment, Machinery and Other The fair values of rental and service equipment and machinery were estimated using a direct and indirect cost approach depending upon the asset type. The cost approach estimates fair value by considering the amount required to construct or purchase a new asset of equal utility at current prices, with adjustments for asset function, age, physical deterioration, and obsolescence. For certain assets, such as trucks, trailers and metalworking equipment, where an active secondary market exists, fair value was estimated using the market approach. Intangible Assets We applied the income approach methodology to estimate the value of developed and acquired technology and trade name (the “Intangible Assets”). The value of the Company’s trade name and developed and acquired technology were estimated through the relief from royalty method based on the present value of the cost savings realized due to the Company’s ownership of the assets. For acquired and developed technology, the present values of the hypothetical royalty savings were applied to revenue attributable to technologies after obsolescence. The hypothetical royalty savings percentage ranged from 1 % to 7 % of revenue depending on the segment, reporting unit and market differentiation the technologies. For the Company’s trade name, the present value of hypothetical royalty savings applied to revenue attributable to trade name ranged from 1.5 % to 2 % depending on the reporting unit. The present value of the after tax cash flows for all Intangible Assets were estimated based on a discount rate between 12.8 % and 16 %. Weatherford International plc – 2020 Form 10-K | 64 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Lease liabilities and right of use assets The fair value of lease liabilities was measured as the present value of the remaining lease payments, as if the lease were a new lease as of the Effective Date. The Company used its incremental borrowing rate (“IBR”) as the discount rate in determining the present value of the remaining lease payments, which is consistent with the market yield utilized in determining the fair value of the Company’s Exit Notes, discussed below. Based upon the corresponding lease term, the IBR ranged from 8.45 % to 10.35 %. Upon emergence from bankruptcy on December 13, 2019, the ROU assets were revalued based upon the present value of market-based rent. The remeasurement of our ROU assets was based on the real estate market discount rate as of December 13, 2019. Exit Notes The fair value of the Exit Notes was estimated to approximate par value based on third-party valuation advisors’ analysis of the Company’s collateral coverage, financial metrics, and interest rate for the Exit Notes relative to market rates. New Warrants The fair value of the new warrants was estimated by applying a Black-Scholes model. The Black-Scholes model is a pricing model used to estimate the theoretical price or fair value for a European-style call or put option/warrant based on current stock price, strike price, time to maturity, risk-free rate, volatility, and dividend yield. Consolidated Balance Sheet The adjustments included in the following fresh start consolidated balance sheet reflect the effects of the transactions contemplated by the Plan and executed by the Company on the Fresh Start Reporting Date (reflected in the column “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of Fresh Start Accounting (reflected in the column “Fresh Start Accounting Adjustments”). The explanatory notes provide additional information and significant assumptions with regard to the adjustments recorded and the methods used to determine the fair values. Weatherford International plc – 2020 Form 10-K | 65 Table of Contents Item 8 | Notes to the Consolidated Financial Statements As of December 13, 2019 Fresh Start Reorganization Accounting (Dollars in millions) Predecessor Adjustments (1) Adjustments Successor Assets: Cash and Cash Equivalents $ 641 $ ( 148 ) (2) $ — $ 493 Restricted Cash 398 ( 137 ) (3) — 261 Accounts Receivable, Net 1,274 — — 1,274 Inventories, Net 1,071 — ( 84 ) (17) 987 Other Current Assets 494 ( 4 ) (4) ( 14 ) (18) 476 Total Current Assets 3,878 ( 289 ) ( 98 ) 3,491 Property, Plant and Equipment, Net 1,838 — 289 (19) 2,127 Goodwill — — 239 (20) 239 Intangible Assets, Net 166 — 957 (21) 1,123 Other Non-current Assets 336 25 (5) 27 (22) 388 Total Assets $ 6,218 $ ( 264 ) $ 1,414 $ 7,368 Liabilities: Debtor in Possession Financing $ 1,528 $ ( 1,528 ) (6) $ — $ — Short-term Borrowings and Current Portion of Long-term Debt 319 ( 305 ) (7) ( 1 ) (23) 13 Accounts Payable 667 ( 4 ) (8) — 663 Accrued Salaries and Benefits 263 — — 263 Income Taxes Payable 214 — — 214 Other Current Liabilities 618 ( 22 ) (9) ( 39 ) (24) 557 Total Current Liabilities 3,609 ( 1,859 ) ( 40 ) 1,710 Long-term Debt 60 2,097 (10) ( 6 ) (25) 2,151 Other Non-current Liabilities 518 — 58 (26) 576 Total Liabilities Not Subject to Compromise 4,187 238 12 4,437 Liabilities Subject to Compromise 7,634 ( 7,634 ) (11) — — Shareholders’ Equity (Deficiency): Predecessor Ordinary Shares 1 ( 1 ) (12) — — Successor Ordinary Shares — — (13) — — Predecessor Capital in Excess of Par Value 6,733 ( 35 ) (14) ( 6,698 ) (27) — Successor Capital in Excess of Par Value — 2,897 (15) — (28) 2,897 Retained Earnings (Deficit) ( 10,682 ) 4,271 (16) 6,411 (27) — Accumulated Other Comprehensive Income (Loss) ( 1,697 ) — 1,697 (27) — Weatherford Shareholders’ Equity (Deficiency) ( 5,645 ) 7,132 1,410 2,897 Noncontrolling Interests 42 — ( 8 ) (28) 34 Total Shareholders’ Equity (Deficiency) ( 5,603 ) 7,132 1,402 2,931 Total Liabilities and Shareholders’ Equity (Deficiency) $ 6,218 $ ( 264 ) $ 1,414 $ 7,368 Weatherford International plc – 2020 Form 10-K | 66 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Reorganization Adjustments (Dollars in Millions) Reorganization adjustments required in connection with the application of Fresh Start Accounting and the allocation of the enterprise value to our individual assets and liabilities by reporting unit resulted in the following Reorganization Adjustments. (1) Represent amounts recorded as of the Effective Date for the implementation of the Plan, including, among other items, settlement of the Predecessor’s liabilities subject to compromise, repayment of certain of the Predecessor’s debt, issuances of the Successor’s common shares, proceeds received from the Successor’s debt offering and transfer of restricted cash for the issuance of the Successor’s debt. (2) Net change in Cash and Cash Equivalents: Proceeds from Exit Notes $ 1,600 Cash Collateral Released 167 Payment in full on the DIP Credit Agreement and related unpaid interest ( 1,531 ) Payment in full on the A&R Credit Agreement and related unpaid interest ( 306 ) Payment to Escrow Remaining Professional Fees ( 30 ) Payment on Deferred Financing Fees for Exit Credit Agreements ( 22 ) Payments on Other Liabilities ( 18 ) Payment on Professional Fees not escrowed ( 8 ) Net Change in Cash and Cash Equivalents $ ( 148 ) (3) Net change in Restricted Cash: Payment to Escrow Professional Fees $ 30 Cash Collateral Released ( 167 ) Net Change in Restricted Cash $ ( 137 ) (4) Represents the reclass of amounts to deferred financing fees on the Exit Credit Agreements. (5) Net change in Other Non-current Assets include the following: Payment on Deferred Financing Fees, Including Professional Fees, on the Exit Credit Agreements. $ 22 Reclass of amounts from Other Current Assets to deferred financing fees on the Exit Credit Agreements. 4 Accrual of Deferred Financing Fees on the Exit Credit Agreements 1 Write-off of Deferred Financing Fees on the A&R Credit Agreement ( 2 ) Net Change in Other Non-current Assets $ 25 (6) Represents the payment in full on the DIP Credit Agreement Principal. (7) Represents the payment in full on the A&R Credit Agreement Principal. (8) The decrease in Accounts Payable represents the payment on professional fees offset by the accrual of deferred financing fees. (9) Net change in Other Current Liabilities include the following: Payments of Other Liabilities $ ( 18 ) Payment of Interest on the DIP Credit Agreement ( 3 ) Payment of Interest on the A&R Credit Agreement ( 1 ) Net Change in Other Current Liabilities $ ( 22 ) Weatherford International plc – 2020 Form 10-K | 67 Table of Contents Item 8 | Notes to the Consolidated Financial Statements (10) Changes in Long-term debt include the issuance of the unsecured 11.00 % Exit Notes Due 2024 which is comprised of $ 1.6 billion of the Exit Rights Offering Notes and $ 500 million of the Exit Takeback Notes, offset by the accrual of deferred financing fees. (11) Liabilities Subject to Compromise to be settled in accordance with the Plan and the resulting gain were determined as follows: Liabilities Subject to Compromise $ 7,634 Distribution of equity to creditors ( 2,837 ) Issue Exit Takeback Notes to creditors ( 500 ) Gain on Settlement of Liabilities Subject to Compromise $ 4,297 (12) Represents the cancellation of Predecessor Ordinary Shares at Par Value. (13) Represents the issuance of New Ordinary Shares to Creditors and Prior Ordinary Share Holders at Par Value. (14) Net change in Predecessor Capital in Excess of Par Value include the following: Acceleration of share-based compensation $ 24 Cancellation of Predecessor Ordinary Shares 1 Issuance of New Ordinary Shares to Prior Ordinary Share Holders ( 29 ) Issuance of New Warrant to Prior Ordinary Share Holders $ ( 31 ) Net Change in Predecessor Capital in Excess of Par Value $ ( 35 ) (15) Net change in Successor Capital in Excess of Par Value include the following: Issuance of New Ordinary Shares to Creditors $ 2,837 Issuance of New Warrant to Prior Ordinary Share Holders 31 Issuance of New Ordinary Shares to Prior Ordinary Share Holders 29 Net Change in Successor Capital in Excess of Par Value $ 2,897 (16) Net Change in Retained Deficit include the following: Gain on Settlement of Liabilities Subject to Compromise $ 4,297 Acceleration of share-based compensation ( 24 ) Write-off of deferred financing fees on the A&R Credit Agreement ( 2 ) Net Change in Retained Deficit $ 4,271 Fresh Start Adjustments (Dollars in Millions) (17) Changes in Inventories, Net reflect the fair value adjustment of $ 84 million. Successor Fair Value Predecessor Historical Value Raw Materials, Components and Supplies 78 $ 78 Work in Process 51 55 Finished Goods 858 938 Totals $ 987 $ 1,071 Weatherford International plc – 2020 Form 10-K | 68 Table of Contents Item 8 | Notes to the Consolidated Financial Statements (18) Reflects the elimination of current deferred costs associated with contracts with customers of $ 10 million and the elimination of certain prepaid taxes of $ 4 million due to the adoption of Fresh Start Accounting. (19) Changes in Property, Plant and Equipment, Net reflect the fair value adjustment of $ 289 million. Successor Fair Value Predecessor Historical Value Land, Buildings and Leasehold Improvements $ 569 $ 1,205 Rental and Service Equipment 1,280 4,697 Machinery and Other 278 1,543 2,127 7,445 Less: Accumulated Depreciation — ( 5,607 ) Property, Plant and Equipment, Net $ 2,127 $ 1,838 (20) Reflects the recognition of Goodwill. (21) Changes in Intangible Assets reflect the fair value adjustment of $ 957 million. Successor Fair Value Predecessor Historical Value Developed and Acquired Technology $ 728 $ 74 Trade Name 395 — Customer Relationships and Contracts — 39 Other — 53 Totals $ 1,123 $ 166 (22) Reflects the fair value adjustment to the increase the Company’s Right of Use Assets by $ 13 million and Non-current Deferred Tax Asset by $ 14 million. (23) Reflects the fair value adjustment to the Company’s current portion of financed lease obligations. (24) Reflects the fair value adjustments to (i) increase the current portion of operating lease obligations by $ 5 million, (ii) decrease deferred revenues associated with contracts with customers by $ 29 million, and (iii) decrease intangible liability by $ 15 million. (25) Reflects the fair value adjustment to the Company’s long-term portion of financed lease obligations. (26) Reflects the fair value adjustment to (i) increase the long-term portion of operating lease obligations by $ 22 million, (ii) decrease the intangible liability by $ 7 million, and (iii) record a Non-current Deferred Tax Liability of $ 43 million. (27) Reflects the cumulative impact of Fresh Start Accounting adjustments discussed herein and the elimination of Predecessor accumulated other comprehensive loss and Predecessor accumulated deficit. (28) Reflects the fair value adjustment to noncontrolling ownership interests in certain subsidiaries. Weatherford International plc – 2020 Form 10-K | 69 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 4. Impairments and Other Charges We recorded the following in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations: Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Long-lived Asset Impairments $ 814 $ — $ 20 $ 151 Goodwill Impairment 239 — 730 1,917 Inventory Charges 138 — 117 — Asset Write-downs and Rigs Related Charges 11 — 132 58 Other Charges, Net 34 — 105 29 Total Impairment and Other Charges $ 1,236 $ — $ 1,104 $ 2,155 We recognized long-lived asset and goodwill impairments as further described in “Note 10 – Long-Lived Asset Impairments” and “Note 11 – Goodwill and Intangible Assets”, respectively and inventory charges as further described in “Note 7 – Inventories, Net”. See also “Note 8 – Business Combinations and Divestitures.” 5. New Accounting Pronouncements Accounting Standards Adopted On January 1, 2020, we adopted Financial Accounting Standards Board Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology in previous U.S. GAAP with a methodology (Current Expected Credit Losses model, or CECL) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. We estimate expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Our customer base has generally similar collectability risk characteristics, although risk profiles can vary between larger independent customers and state-owned customers, which may have a lower risk than smaller independent customers. The updated guidance applies to (i) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, and (ii) loan commitments and other off-balance sheet credit exposures. The adoption of this standard update did not have a material impact on our 2020 Consolidated Financial Statements. Accounting Standards Issued Not Yet Adopted Evaluations of all other new accounting pronouncements that have been issued, but not yet effective are on-going, and at this time are not expected to have a material impact on our Consolidated Financial Statements. Weatherford International plc – 2020 Form 10-K | 70 Table of Contents 6. Accounts Receivable Factoring From time to time, we participate in factoring arrangements to sell accounts receivable to third-party financial institutions. Our factoring transactions were recognized as sales, and the proceeds are included as operating cash flows in our Consolidated Statements of Cash Flows. The loss on sale of accounts receivable was immaterial for all periods. The following table presents accounts receivable sold and the cash proceeds, net of discount and hold-back. Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Accounts Receivable Sold $ 90 $ 7 $ 199 $ 382 Cash Proceeds from Sale of Accounts Receivable $ 79 $ 7 $ 186 $ 373 7. Inventories, Net Inventories, net of reserves of $ 119 million and $ 0 as of December 31, 2020 and December 31, 2019, respectively, by category were as follows: December 31, (Dollars in millions) 2020 2019 Finished Goods $ 655 $ 830 Raw Materials, Components and Supplies 62 142 Total Inventory $ 717 $ 972 During the 2020 and 2019 Successor Periods and the 2019 and 2018 Predecessor Periods, inventory charges were $ 210 million, $ 0 , $ 159 million and $ 80 million, respectively. Inventory charges recognized included write-downs for excess and obsolete inventory considered commercially unviable or technologically obsolete considering current and future demand, as a result of the volatility in oil and gas commodity demand, the downturn in the oil and gas industry and in 2020, the impact of the COVID-19 pandemic. These charges were recognized in the following captions on our Consolidated Statements of Operations: Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Inventory Charges in “Impairments and Other Charges” $ 138 $ — $ 117 $ — Inventory Charges in “Cost of Products” 57 — 18 80 Inventory Charges in “Restructuring Charges” 15 — 24 — Total Inventory Charges $ 210 $ — $ 159 $ 80 Weatherford International plc – 2020 Form 10-K | 71 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 8. Business Combinations and Divestitures Acquisitions We did not have any acquisitions of businesses during the years ended December 31, 2020 or 2019. In the 2018 Predecessor Period we acquired the remaining 50 % equity interest in our Qatari joint venture that we previously consolidated and accounted for as an equity method investment. The total consideration to purchase the remaining equity interest was $ 87 million, which is comprised of a cash consideration of $ 72 million ($ 48 million in the year of closing and $ 24 million deferred consideration to be paid two years from closing) and an estimated contingent consideration of $ 15 million related to services the Qatari entity will render under new contracts. As a result of this step acquisition transaction with a change in control, we remeasured our previously held equity investment to fair value and recognized a $ 12 million gain in the 2018 Predecessor Period. We paid the $ 24 million deferred consideration in the 2020 Successor Period. Divestitures We did not have any significant divestitures of businesses during the Successor year ended December 31, 2020. On April 30, 2019, we completed the sale of our Reservoir Solutions business, also known as our laboratory services business to Oil & Gas Labs, LLC, an affiliate of CSL Capital Management, L.P., for an aggregate purchase price of $ 206 million in cash, subject to escrow release and customary post-closing working capital adjustments. The business disposition included our laboratory and geological analysis business, including the transfer of substantially all personnel and associated contracts related to the business. We recognized a gain of $ 117 million and divested a carrying amount of $ 61 million in net assets. On April 30, 2019, we completed the sale of our surface data logging business to Excellence Logging for $ 50 million in total consideration, subject to customary post-closing working capital adjustments. The business disposition included our surface data logging equipment, technology and associated contracts related to the business. We recognized an insignificant loss and divested a carrying amount of $ 34 million in net assets. In the 2019 Predecessor Period, we completed the final closings in a series of closings pursuant to the purchase and sale agreements entered into with ADES International Holding Ltd. in July of 2018 to sell our land drilling rig operations in Algeria, Kuwait and Saudi Arabia, as well as two idle land rigs in Iraq, for an aggregate purchase price of $ 288 million. In the 2018 Predecessor Period, we received gross proceeds of $ 216 million and recognized a loss of $ 9 million after recognizing asset write-down charges of $ 58 million for deferred mobilization costs and other rigs related assets as such costs were no longer recoverable. The carrying amount of the assets and liabilities sold in 2018 totaled $ 253 million and $ 36 million, respectively, to include PP&E, inventory, accounts receivable and other assets and liabilities. In the 2019 Predecessor Period we received the remaining gross proceeds of $ 72 million and recognized a loss of $ 6 million. The carrying amounts of net assets divested during the 2019 Predecessor Period was $ 66 million. We divested several of our remaining rig assets through separate asset sale agreements throughout 2019. In the 2018 Predecessor Period, we completed the sale of our continuous sucker rod service business in Canada for a purchase price of $ 25 million and recognized a gain of $ 2 million. During 2018, we also completed the sale of an equity investment in a joint venture for $ 12.5 million and recognized a gain of $ 3 million. See “Note 10 – Long-Lived Asset Impairments” for further details related to impairments and those specific to our land drilling rigs assets. Weatherford International plc – 2020 Form 10-K | 72 Table of Contents 9. Property, Plant and Equipment, Net Property, plant and equipment, net was composed of the following: December 31, (Dollars in millions) 2020 2019 Land, Buildings and Leasehold Improvements $ 515 $ 571 Rental and Service Equipment 869 1,296 Machinery and Other 219 280 1,603 2,147 Less: Accumulated Depreciation 367 25 Property, Plant and Equipment, Net $ 1,236 $ 2,122 Depreciation expense was $ 340 million, $ 25 million, $ 386 million, and $ 493 million for the 2020 and 2019 Successor Periods and the 2019 and 2018 Predecessor Periods, respectively. See “Note 10 – Long-Lived Asset Impairments” for additional information on property, plant and equipment impairments. 10. Long-Lived Asset Impairments The unprecedented global economic and industry conditions attributable to the COVID-19 pandemic resulting in the significant volatility in the energy industry impacting the demand for our products and services were identified as long-lived asset impairment indicators. As a result, we performed impairment assessments quarterly in 2020 through analysis of the undiscounted cash flow of our asset groups, which include property, plant and equipment, definite-lived intangible assets, goodwill and right of use assets. As of March 31, 2020, and as of June 30, 2020, we identified that impairment occurred in certain asset groups and with the assistance of third-party valuation advisors we determined the fair value of those asset groups. Based on our impairment tests, we determined the carrying amount of certain long-lived asset groups exceeded their respective fair values and we recognized $ 814 million of long-lived asset impairments in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations. The fair values of certain of our long-lived asset groups were determined using discounted cash flow or Level 3 fair value analyses. The income approach required significant assumptions to determine the fair value of an asset or asset group including the estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins and the discount rate. The table below details the Successor long-lived asset impairments by asset and segment recognized for the year ended December 31, 2020. (Dollars in millions) Western Hemisphere Eastern Hemisphere Total Property, Plant and Equipment $ 316 $ 255 $ 571 Intangible Assets 43 112 155 Right of Use Assets 56 32 88 Total Impairment Charges $ 415 $ 399 $ 814 We recognized long-lived asset impairments of $ 20 million for the 2019 Predecessor Period to write-down our land drilling rigs in our Western Hemisphere segment totaling $ 13 million and Eastern Hemisphere totaling $ 7 million. During 2018, we recognized long-lived asset impairments of $ 151 million ($ 46 million in our Western Hemisphere and $ 105 million in our Eastern Hemisphere segments) to write-down our land drilling rigs assets. See “Note 8 – Business Combinations and Divestitures” and “Note 15 – Fair Value of Financial Instruments, Assets and Other Assets” for more details. Weatherford International plc – 2020 Form 10-K | 73 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 11. Goodwill and Intangible Assets Successor Goodwill Recognition and Impairment As a result of Fresh Start Accounting, we recognized $ 239 million of goodwill in our Middle East and North Africa (“MENA”) and Russia, Turkmenistan and Kazakhstan (“Russia”) reporting units. During the first half of 2020 we identified the impairment indicators as discussed in “Note 10 – Long-Lived Asset Impairments” that triggered interim quantitative goodwill assessments as of March 31, 2020 and June 30, 2020. The fair values of our reporting units were determined using a combination of the income approach and the market approach for comparable companies in our industry, a Level 3 fair value analysis. Determining the fair value of the reporting units requires management to develop significant judgments, including estimating discounted future cash flows by reporting unit, specifically forecasted revenue, forecasted operating margins and discount rates. We determined that the fair value of our reporting units were less than their carrying values and as a result of our impairment tests, we fully impaired our goodwill in the MENA and Russia reporting units as presented in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations. The changes in the carrying amount of goodwill by reporting segment for the years ended December 31, 2020 and 2019, are presented in the following table. (Dollars in millions) Western Hemisphere Eastern Hemisphere Total Balance at December 31, 2018 (Predecessor) $ 494 $ 219 $ 713 Impairment ( 508 ) ( 222 ) ( 730 ) Reclassification from assets held for sale 4 — 4 Foreign currency translation 10 3 13 Balance at December 13, 2019 (Predecessor) — — — Fresh Start Accounting Valuation — 239 239 Balance at December 31, 2019 (Successor) $ — $ 239 $ 239 Impairment $ — $ ( 239 ) $ ( 239 ) Balance at December 31, 2020 (Successor) $ — $ — $ — Predecessor Period Goodwill Impairments and Assessment Factors The Predecessor impairment indicators during 2019 and 2018 were a result of lower activity levels and lower exploration and production capital spending that resulted in a decline in drilling activity and forecasted growth in all our reporting units. Our lower than expected and forecasted financial results were due to the continued weakness within the energy market and consequently our inability to quickly and significantly reduce our cost structure under our restructuring plans savings. In the 2019 Predecessor Period, our goodwill impairment tests indicated that goodwill for all our reporting units in the Western Hemisphere and Eastern Hemisphere were impaired and as a result we incurred a goodwill impairment charge of $ 730 million. In 2018, our annual and interim goodwill impairment tests indicated that our goodwill was impaired and as a result we incurred a goodwill impairment charge of $ 1.9 billion, of which $ 1.4 billion was related to our Western Hemisphere segment and $ 537 million was related to our Eastern Hemisphere segment. The cumulative impairment loss for goodwill was $ 239 million for the Successor and $ 3.4 billion for Predecessor periods. Weatherford International plc – 2020 Form 10-K | 74 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Intangible Assets The components of intangible assets were as follows: December 31, 2020 Gross Net Carrying Accumulated Intangible (Dollars in millions) Amount Amortization Assets Developed and Acquired Technology $ 588 $ ( 132 ) $ 456 Trade Names 395 ( 41 ) 354 Totals $ 983 $ ( 173 ) $ 810 December 31, 2019 Gross Net Carrying Accumulated Intangible (Dollars in millions) Amount Amortization Assets Developed and Acquired Technology $ 728 $ ( 7 ) $ 721 Trade Names 395 ( 2 ) 393 Totals $ 1,123 $ ( 9 ) $ 1,114 We recognized an impairment of $ 155 million of our developed and acquired technology in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations during the Successor year ended December 31, 2020. Amortization expense was $ 163 million in the Successor year ended December 31, 2020, $ 9 million in the 2019 Successor Period, $ 61 million in the 2019 Predecessor Period and $ 63 million in the Predecessor year ended December 31, 2018. Based on the carrying value of intangible assets at December 31, 2020, amortization expense for the subsequent five years is estimated as follows (dollars in millions): Period Amount 2021 $ 157 2022 157 2023 157 2024 144 2025 40 Weatherford International plc – 2020 Form 10-K | 75 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 12. Restructuring Charges In response to the impact of our business from the COVID-19 pandemic and the significant and sudden changes in oil and gas prices, we have continued to develop and execute on plans to rationalize and restructure our business and right-size our operations and personnel. Additional charges with respect to our ongoing cost reduction actions may be recognized in subsequent periods. The following table presents restructuring charges for the Successor and Predecessor Periods. Successor Predecessor Period From Period From Year 12/14/2019 01/01/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Severance Charges $ 132 $ — $ 53 $ 61 Facility Exit Charges 10 — 99 61 Inventory Charges 15 — 24 — Property, Plant and Equipment 40 — 13 2 Right of Use and Other Assets 9 — — 2 Total Restructuring Charges $ 206 $ — $ 189 $ 126 The following table presents total restructuring charges by reporting segment and Corporate for the Successor and Predecessor Periods. Successor Predecessor Period From Period From Year 12/14/2019 01/01/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Western Hemisphere $ 101 $ — $ 84 $ 27 Eastern Hemisphere 52 — 50 45 Corporate 53 — 55 54 Total Restructuring Charges $ 206 $ — $ 189 $ 126 The following table presents total restructuring accrual activity for the periods presented. Restructuring charges in the table below exclude restructuring related asset charges. (Dollars in millions) Accrued Balance at Beginning of Period Charges Cash Payments Other Accrued Balance at End of Period Successor Year Ended December, 31, 2020 $ 66 $ 142 $ ( 137 ) $ ( 18 ) $ 53 Successor Period - 2019 $ 66 $ — $ — $ — $ 66 Predecessor Period - 2019 $ 59 $ 152 $ ( 120 ) $ ( 25 ) $ 66 Predecessor Year Ended December 31, 2018 $ 61 $ 120 $ ( 109 ) $ ( 13 ) $ 59 Weatherford International plc – 2020 Form 10-K | 76 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 13. Leases We lease certain facilities, land, vehicles, and equipment. Leases with an initial term of 12 months or less (“short-term leases”) are not recorded on the balance sheet (including short-term sale leaseback transactions); we recognize lease expense for these leases on a straight-line basis over the lease term. We have data center lease agreements with lease and non-lease components which are accounted for separately, while for the remainder of our agreements we have elected the practical expedient to account for lease and non-lease components as a single lease component. For certain equipment leases, such as copiers and vehicles, we account for the leases under a portfolio method. Operating lease payments include related options to extend or terminate lease terms that are reasonably certain of being exercised. The unmanned equipment that we lease to customers under operating leases consists primarily of drilling rental tools and artificial lift pumping equipment. These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. See “Note 1 – Summary of Significant Accounting Policies” and “Note 23 – Revenues” for additional details on our equipment rental revenues. Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Ended through through (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 Lease Expense Components: Operating Lease Expense $ 76 $ 5 $ 109 Short-term and Variable Lease Expense 63 5 91 Subtotal of Operating Lease Expense $ 139 $ 10 $ 200 Finance Lease Expense: Amortization of ROU Assets and Interest on Lease Liabilities 15 1 11 Sublease Income ( 6 ) ( 1 ) ( 6 ) Total Lease Expense $ 148 $ 10 $ 205 Lease expense incurred under operating leases was $ 187 million for the Predecessor year ended December 31, 2018. We are committed under various operating lease agreements primarily related to office space and equipment. Generally, these leases include renewal provisions and rental payments, which may be adjusted for taxes, insurance and maintenance related to the property. Future minimum commitments under operating and finance leases are as follows: Operating Finance (Dollars in millions) Leases Leases Maturity of Lease Liabilities as of December 31, 2020: 2021 $ 91 $ 14 2022 69 12 2023 39 12 2024 28 11 2025 22 11 After 2025 131 14 Total Lease Payments 380 74 Less: Interest 132 17 Present Value of Lease Liabilities $ 248 $ 57 Weatherford International plc – 2020 Form 10-K | 77 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through (Dollars in millions except years and percentages) 12/31/2020 12/31/2019 12/13/2019 Other Supplemental Information: Cash paid for amounts included in the measurement of lease liabilities: Operating cash outflows from operating leases $ 101 $ 5 $ 131 Operating cash outflows from finance leases $ 5 $ — $ 4 Financing cash outflows from finance leases $ 9 $ 1 $ 8 ROU assets obtained in exchange of new operating lease liabilities $ 37 $ 2 $ 59 ROU assets obtained in exchange of new finance lease liabilities $ 4 $ — $ 6 Loss on sale leaseback transactions (short-term) (a) $ — $ — $ 34 December 31, 2020 December 31, 2019 Weighted-average remaining lease term (years) Operating leases 8.1 7.8 Finance leases 5.9 6.7 Weighted-average discount rate (percentages) Operating leases 9.6 % 9.2 % Finance leases 9.1 % 9.1 % (a) Included in “Impairments and Other Charges” in our Consolidated Statements of Operations and “Other Assets and Liabilities, Net” in our Consolidated Statements of Cash Flows. Weatherford International plc – 2020 Form 10-K | 78 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 14. Borrowings and Other Debt Obligations Total debt carrying values consisted of the following: December 31, (Dollars in millions) 2020 2019 Finance Lease Current Portion $ 9 $ 10 Other Short-term Financing Arrangements 4 3 Short-term Borrowings $ 13 $ 13 11.00 % Exit Notes due 2024 $ 2,098 $ 2,097 8.75 % Senior Secured Notes due 2024 455 $ — Finance Lease Long-term Portion 48 $ 54 Long-term Debt $ 2,601 $ 2,151 Exit Notes On December 13, 2019, we issued unsecured 11.00 % Exit Notes due in 2024 for an aggregate principal amount of $ 2.1 billion (of which $ 500 million was in the form of Exit Takeback Notes to existing creditors on the senior notes being cancelled). Interest on the Exit Notes accrues at the rate of 11.00 % per annum and is payable semiannually in arrears on June 1 and December 1. We commenced interest payments thereunder on June 1, 2020. At any time prior to December 1, 2021, the Company may redeem the Exit Notes, in whole or in part, at a redemption price equal to the sum of (i) the principal amount thereof, plus (ii) the “make-whole” premium at the redemption date, plus (iii) accrued and unpaid interest, if any, to the redemption date (subject to the right of the noteholders of record on the relevant record date to receive interest due on an interest payment date that is on or prior to the redemption date). On and after December 1, 2021, the Company may redeem all or part of the 11.00 % Exit Notes at redemption prices (expressed as percentages of the principal amount) equal to (i) 105.5 % for the twelve-month period beginning on December 1, 2021; (ii) 102.75 % for the twelve-month period beginning on December 1, 2022; and (iii) 100 % for the twelve-month period beginning December 1, 2023 and at any time thereafter, plus accrued and unpaid interest at the redemption date. In addition, at any time prior to December 1, 2022, the Company may redeem up to $ 500 million in the aggregate principal amount of the 11.00 % Exit Notes at a redemption price of 103 % of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. If a change of control (as defined in the Indenture) occurs, holders of the Exit Notes will have the right to require the Company to repurchase all or any part of their Exit Notes at a purchase price equal to 101 % of the aggregate principal amount of the 11.00 % Exit Notes repurchased, plus accrued and unpaid interest, if any, to the repurchase date. The Exit Notes are guaranteed on a senior basis by the Company’s existing domestic subsidiaries and certain foreign subsidiaries that guarantee its obligations under the Exit Credit Agreements on a full and unconditional basis. Senior Secured Notes On August 28, 2020, Weatherford International Ltd., as issuer, Weatherford International plc and Weatherford International, LLC, as guarantors, and the other subsidiary guarantors party thereto, entered into an indenture with Wilmington Trust, National Association, as trustee and collateral agent, and issued the Senior Secured Notes in an aggregate principal amount of $ 500 million. Interest on the Senior Secured Notes accrues at the rate of 8.75 % per annum and is payable semiannually in arrears on March 1 and September 1, commencing on March 1, 2021. Proceeds from the issuance were reduced by a purchase commitment discount of $ 25 million and a commitment fee of $ 15 million. These debt issuance costs along with legal and other direct costs are presented as a contra-liability of the carrying amount of the debt liability and will be recognized using the effective interest rate method over the term of the debt in “Interest Expense, Net” on our Consolidated Financial Statements. The Senior Secured Notes are fully and unconditionally guaranteed on a senior secured basis by the Company’s material Weatherford International plc – 2020 Form 10-K | 79 Table of Contents Item 8 | Notes to the Consolidated Financial Statements domestic subsidiaries, certain material foreign subsidiaries, and in the future by other subsidiaries that guarantee its obligations under the LC Credit Agreement or other material indebtedness. The Senior Secured Notes are secured by substantially all of the assets of the Company and the guarantors (on an effectively first-priority basis with respect to the priority collateral for the Senior Secured Notes, and on an effectively second-priority basis with respect to the priority collateral for the LC Credit Agreement, in each case, subject to permitted liens). LC Credit Agreement On December 13, 2019, pursuant to the terms of the Plan, we entered into the LC Credit Agreement in an aggregate amount of $ 195 million maturing on June 13, 2024 with the lenders party thereto and Deutsche Bank Trust Company Americas as administrative agent. The LC Credit Agreement is used for the issuance of bid and performance letters of credit of the Company and certain of its subsidiaries. On August 28, 2020, we amended the LC Credit Agreement to, among other things, increase the aggregate commitments to $ 215 million, modify the maturity date to May 29, 2024 and reduce the minimum liquidity covenant from $ 200 million to $ 175 million. At December 31, 2020, we had approximately $ 167 million in outstanding letters of credit under the LC Credit Agreement and availability of $ 48 million. Our unamortized issuance costs at December 31, 2020 was $ 12 million and is recognized over the term of the agreement in “Other Expense, Net” on our Consolidated Financial Statements. As of December 31, 2020, we had $ 338 million of letters of credit outstanding, consisting of the $ 167 million mentioned above under the LC Credit Agreement and another $ 171 million under various uncommitted facilities (of which there was $ 164 million in cash collateral held and recorded in “Restricted Cash” on the Consolidated Balance Sheets). The outstanding amount of each letter of credit under the LC Credit Agreement bears interest at LIBOR plus an applicable margin of 350 basis points per annum. The LC Credit Agreement includes (i) a 12.5 basis point per annum fronting fee on the outstanding amount of each such letter of credit and (ii) an unused commitment fee in respect of the unutilized commitments at a rate of 50 basis point per annum on the average daily unused commitments under the LC Credit Agreement. The LC Credit Agreement is secured by substantially all the personal assets and properties of the Company and certain of its subsidiaries (including a first lien on the priority collateral for the LC Credit Agreement and a second lien on the priority collateral for Senior Secured Notes, in each case, subject to permitted liens). The LC Credit Agreement is also guaranteed on an unsecured basis by certain other subsidiaries of the Company. ABL Credit Agreement On the Effective Date pursuant to the terms of the Plan, the Company entered into the ABL credit agreement in an aggregate amount of $ 450 million with the lenders party thereto and Wells Fargo Bank, N.A. as administrative agent. On August 28, 2020, we issued $ 500 million of 8.75 % Senior Secured Notes due 2024 (“Senior Secured Notes”) and terminated the ABL Credit Agreement. At the time of termination, there were no loan amounts outstanding under the ABL Credit Agreement, and all outstanding letters of credit thereunder were either cash collateralized or transferred to issuing banks under the LC Credit Agreement, described above. Upon termination of the ABL Credit Agreement, we recorded $ 15 million of unamortized deferred debt issuance costs in “Interest Expense, Net” on our Consolidated Financial Statements. At December 31, 2019, the Company did no t have any borrowings under the ABL Credit Agreement. Covenants for the Exit and Senior Secured Notes and LC Credit Agreement The indentures governing the Exit Notes and Senior Secured Notes contain covenants that limit, among other things, our ability and the ability of certain of our subsidiaries, to: incur, assume or guarantee additional indebtedness; pay dividends or distributions on capital stock or redeem or repurchase capital stock; make investments; sell stock of our subsidiaries; transfer or sell assets; create liens; enter into transactions with affiliates; and enter into mergers or consolidations. The Company is subject to a $ 175 million minimum liquidity covenant under our amended LC Credit Agreement and Senior Secured notes and, as defined in the applicable documents, Weatherford had available liquidity of $ 928 million as of December 31, 2020. Under our amended LC Credit Agreement, the Company is also subject to a minimum secured liquidity (or cash in controlled accounts) covenant of $ 125 million. Our secured liquidity was $ 779 million at December 31, 2020. As of December 31, 2020, we were in compliance with the covenants of the indentures governing the Exit Notes and Senior Secured Notes and the LC Credit Agreement. At such time as (1) the Exit Notes have an investment grade rating from both of Moody’s Investors Service, Inc. and Standard and Poor’s Ratings Services and (2) no default has occurred and is continuing under the Indenture, certain of these and Weatherford International plc – 2020 Form 10-K | 80 Table of Contents Item 8 | Notes to the Consolidated Financial Statements other covenants will be suspended and cease to be in effect so long as the rating assigned by either Moody’s or S&P has not subsequently declined to below Baa3 or BBB- (or equivalent). The Indentures also provides for certain customary events of default, including, among others, nonpayment of principal or interest, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, bankruptcy and insolvency events, and cross acceleration, which would permit the principal, premium, if any, interest and other monetary obligations on all the then outstanding Senior Secured Notes and Exit Notes to be declared due and payable immediately. The following is a summary of scheduled debt maturities by year: (Dollars in millions) 2021 $ 13 2022 8 2023 8 2024 2,608 2025 8 Thereafter 16 Total Debt Maturities $ 2,661 Unamortized Debt Issuance and Discount $ ( 47 ) Total Debt Carrying Value $ 2,614 Predecessor Debt Prior Credit Agreements During our bankruptcy proceedings, we had an unsecured senior revolving credit agreement (the “A&R Credit Agreement”), a Secured Second Lien 364-Day Revolving Credit Agreement (the “364-Day Credit Agreement”) and a Term Loan Agreement, collectively referred to as the “Prior Credit Agreements.” See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for further details. Predecessor Senior and Exchangeable Senior Notes Prior to the Petition Date, we issued various senior notes and an exchangeable senior note, all of which ranked equally with our existing and future senior unsecured indebtedness, which had semi-annual interest payments and no sinking fund requirements. See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” and “Note 3 – Fresh Start Accounting” for further details. Predecessor Tender Offers Our February 2018 debt offering partially funded a concurrent tender offer to purchase for cash any and all of our 9.625 % senior notes due 2019. We settled the tender offer in cash for the amount of $ 475 million, retiring an aggregate face value of $ 425 million and accrued interest of $ 20 million. In April 2018, we repaid the remaining principal outstanding on an early redemption of the bond. We recognized a cumulative bond tender loss of $ 34 million on these transactions in “Other Expense, Net” on the accompanying Consolidated Statements of Operations. Weatherford International plc – 2020 Form 10-K | 81 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 15. Fair Value of Financial Instruments, Assets and Other Assets Financial Instruments and Other Assets Measured and Recognized at Fair Value We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. Our valuation techniques require inputs that we categorize using a three level hierarchy, from highest to lowest level of observable inputs. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices or other market data for similar assets and liabilities in active markets, or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based upon our own judgment and assumptions used to measure assets and liabilities at fair value. Classification of a financial asset or liability within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. Other than the derivative instruments discussed in “Note 16 – Derivative Instruments” we had no other material assets or liabilities measured and recognized at fair value on a recurring basis at December 31, 2020 and December 31, 2019. Fair Value of Other Financial Instruments Our other financial instruments include cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings and long-term debt. The carrying value of our cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings approximates their fair value due to their short maturities. These short-term borrowings are classified as Level 2 in the fair value hierarchy. As of December 31, 2019 we held $ 50 million of held-to-maturity Angolan government bonds which matured in 2020 and we collected the proceeds. The fair value of our long-term debt fluctuates with changes in applicable interest rates among other factors. Fair value will exceed carrying value when the current market interest rate is lower than the interest rate at which the debt was originally issued and will be less than the carrying value when the market rate is greater than the interest rate at which the debt was originally issued. The fair value of our long-term debt is classified as Level 2 in the fair value hierarchy and is established based on observable inputs in less active markets. The fair value and carrying value of our senior notes were as follows: December 31, December 31, (Dollars in millions) 2020 2019 11.00% Exit Notes due 2024 $ 1,628 $ 2,252 8.75% Senior Secured Notes due 2024 507 — Total Fair Value of Senior Notes $ 2,135 $ 2,252 Carrying Value of Senior Notes $ 2,553 $ 2,097 Non-recurring Fair Value Measurements In the 2019 Successor Period, our Fresh Start Accounting to determine the reorganization value derived from the enterprise value associated with the Plan was allocated to the Company’s identifiable tangible and intangible assets and liabilities based on their fair values (except for deferred income taxes), with the remaining excess value allocated to Goodwill. They were determined to be Level 3 fair values. See further discussion at Note 3 – Fresh Start Accounting. In the 2020 Successor Period and the 2019 Predecessor Period, our goodwill impairment tests indicated that our goodwill was impaired and as a result was written down to estimated fair value. The Level 3 fair values of our reporting units were determined using a combination of the income approach and the market approach. The unobservable inputs to the income approach requiring significant assumptions include each reporting unit’s estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins, and the discount rate. The market approach considered market multiples of comparable publicly traded companies to estimate fair value as a multiple of each reporting unit’s actual and forecasted earnings. During the 2020 Successor Period, we recognized long-lived asset impairments to write-down our assets or asset groups to the lower of carrying amount or fair value less cost to sell, triggered by the current and forecasted impacts of the COVID-19 Weatherford International plc – 2020 Form 10-K | 82 Table of Contents Item 8 | Notes to the Consolidated Financial Statements pandemic on our operations. The Level 3 fair values of the long-lived assets or asset groups were determined using a combination of the income approach and the market approach. The unobservable inputs to the income approach requiring significant assumptions include each asset groups estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins, and the discount rate. During the 2019 Predecessor Period, we recognized long-lived asset impairments to write-down our assets to the lower of carrying amount or fair value less cost to sell. The change in our expectations of the market’s recovery, in addition to successive negative operating cash flows in certain disposal asset groups represented an indicator that those assets will no longer be recoverable over their remaining useful lives. The Level 3 fair values of the long-lived assets were determined using a combination of the income approach and the market approach. In 2018, our annual and interim goodwill impairment tests indicated that our goodwill was impaired and as a result three of our reporting units were written down to their estimated fair values. The Level 3 fair values of our reporting units were determined using a combination of the income approach and the market approach. The unobservable inputs to the income approach requiring significant assumptions include each reporting unit’s estimated discounted future cash flows, specifically the forecasted revenue, forecasted operating margins, and the discount rate. The market approach considered market multiples of comparable publicly traded companies to estimate fair value as a multiple of each reporting unit’s actual and forecasted earnings. During 2018, long-lived assets were impaired and written down to their estimated fair values due to the sustained downturn in the oil and gas industry that resulted in a reassessment of our disposal groups for our land drilling rigs that were included in assets held for sale at December 31, 2018. The Level 3 fair values of the long-lived assets were determined using a combination of the income approach and the market approach. The market approach considered market sales values for similar assets. The unobservable inputs to the income approach included the assets’ estimated future cash flows and estimates of discount rates commensurate with the assets’ risks. See further discussion at “Note 4 – Impairments and Other Charges,” “Note 10 – Long-Lived Asset Impairments”, and “Note 11 – Goodwill and Intangible Assets.” 16. Derivative Instruments Fro m time to time, we may enter into derivative financial instrument transactions to manage or reduce our market risk. We manage our debt portfolio to achieve an overall desired position of fixed and floating rates. We enter into foreign currency forward contracts and cross-currency swap contracts to economically hedge our exposure to fluctuations in various foreign currencies. The major risks from interest rate derivatives include changes in the interest rates affecting the fair value of such instruments, potential increases in interest expense due to market increases in floating interest rates, changes in foreign exchange rates and the creditworthiness of the counterparties in such transactions. We monitor the creditworthiness of our counterparties, which are multinational commercial banks. The fair values of all our outstanding derivative instruments are determined using a model with Level 2 inputs including quoted market prices for contracts with similar terms and maturity dates. Warrants – Predecessor During the fourth quarter of 2016, in conjunction with the issuance of 84.5 million ordinary shares, we issued one warrant (“Old Warrant”) that gave the holder the option to acquire an additional 84.5 million ordinary shares. The exercise price on the Old Warrant was $ 6.43 per share and was exercisable prior to May 21, 2019. The option period lapsed and the warrants expired unexercised with a fair value of zero. The Old Warrant was carried at fair value on the Consolidated Balance Sheets and changes in the fair value were reported through earnings. The Old Warrant fair value was a Level 2 valuation and was estimated using the Black Scholes valuation model. Inputs to the model included Weatherford’s share price, volatility of our share price, and the risk-free interest rate. We recognized an insignificant gain in May 2019 related to the Old Warrant expiration. In 2018, we recognized a gain of $ 70 million with changes in fair value of the Old Warrant recorded each period in “Other Expense, Net” on the accompanying Consolidated Statements of Operations. The change in fair value of the Old Warrant during 2018 was primarily driven by eliminating the warrant share value associated with any future equity issuance and a decrease in Weatherford’s stock price. Weatherford International plc – 2020 Form 10-K | 83 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Derivatives We enter into contracts to hedge our exposure to currency fluctuations in various foreign currencies. At December 31, 2020 and December 31, 2019, we had outstanding foreign currency forward contracts with notional amounts aggregating to $ 337 million and $ 389 million, respectively. These foreign currency forward contracts are not designated as hedges under ASU 2014-03 , Derivatives and Hedging (Topic 815) . The notional amounts of our foreign currency forward contracts do not generally represent amounts exchanged by the parties and thus are not a measure of the cash requirements related to these contracts or of any possible loss exposure. The amounts actually exchanged at maturity are calculated by reference to the notional amounts and by other terms of the derivative contracts, such as exchange rates. Our foreign currency derivatives are not designated as hedges under ASC 815, and the changes in fair value of the contracts were not material to our consolidated results and are recorded in each period in “Other Expense, Net” on the accompanying Consolidated Statements of Operations. 17. Retirement and Employee Benefit Plans We have defined contribution plans covering certain employees. Contribution expenses related to these plans totaled $ 13 million, $ 31 million and $ 37 million for the Successor year ended December 31, 2020, the 2019 Predecessor Period and the year ended December 31, 2018, respectively. Contribution expense for the 2019 Successor Period was not material. The decrease in 2020 relates primarily to the suspension of employer matching contributions to our U.S. 401(k) savings plan and other contribution plans sponsored by the Company. We have defined benefit pension and other post-retirement benefit plans covering certain U.S. and international employees. Plan benefits are generally based on factors such as age, compensation levels and years of service. Net periodic benefit cost related to these plans totaled $ 2 million, $ 5 million, and $ 8 million for the Successor year ended December 31, 2020, the 2019 Predecessor Period and the Predecessor year ended December 31, 2018, respectively. Net periodic benefit cost for the 2019 Successor Period was not material. The decrease in net periodic benefit cost in 2020 is due to curtailment gains related to headcount reduction. The decrease in net periodic benefit cost in the 2019 Predecessor Period was due primarily to the conversion of our Netherlands plan from defined benefit to defined contribution which led to no defined benefit expense for the year and a curtailment gain for that plan. The projected benefit obligations on a consolidated basis were $ 231 million and $ 198 million as of December 31, 2020 and December 31, 2019, respectively. The increase year over year is due primarily to actuarial losses as a result of lower discount rates along with fluctuations in foreign currency. The fair values of plan assets on a consolidated basis (determined primarily using Level 2 inputs) were $ 164 million and $ 144 million as of December 31, 2020 and December 31, 2019, respectively. The increase in plan assets year over year is due primarily to positive asset returns as well as foreign currency fluctuations. As of December 31, 2020 and December 31, 2019, the net underfunded obligation was substantially all recorded within Other Non-current Liabilities. Additionally, the consolidated pre-tax amount in accumulated other comprehensive income (loss) as of December 31, 2020 and 2019, that has not yet been recognized as a component of net periodic benefit cost was a net loss of $ 12 million and net gain of $ 2 million, respectively. The weighted average assumption rates used for benefit obligations were as follows: Years Ended December 31, 2020 2019 Discount rate: United States Plans 1.50 % - 2.50 % 2.50 % - 3.25 % International Plans 0.40 % - 5.85 % 0.80 % - 6.25 % Rate of Compensation Increase: United States Plans — — International Plans 2.00 % - 3.48 % 2.00 % - 3.50 % During the year ended December 31, 2020 and the 2019 Predecessor Period, we made contributions and paid direct benefits of $ 5 million and $ 5 million, respectively, in connection with our defined benefit pension and other post-retirement benefit plans. Contributions in the 2019 Successor Period were immaterial. In 2021, we expect to fund approximately $ 5 million related to those plans. Weatherford International plc – 2020 Form 10-K | 84 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 18. Income Taxes We provide for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries are considered resident for income tax purposes. The relationship between our pre-tax income or loss and our income tax provision or benefit varies from period to period as a result of various factors which include changes in total pre-tax income or loss, the jurisdictions in which our income is earned, the tax laws in those jurisdictions and in our operating structure. On September 26, 2019, our parent company ceased to be a Swiss tax resident and became an Irish tax resident subject to tax under the Irish tax regime. Our income tax provision from continuing operations consisted of the following: Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 2018 Total Current Provision $ ( 90 ) $ ( 9 ) $ ( 110 ) $ ( 113 ) Total Deferred (Provision) Benefit 5 — ( 25 ) 79 Provision for Income Taxes $ ( 85 ) $ ( 9 ) $ ( 135 ) $ ( 34 ) The difference between the income tax provision at the Irish and/or Swiss income tax rate and the income tax (provision) benefit attributable to “Loss Before Income Taxes” for the 2020 Successor year, 2019 Successor and Predecessor Periods, and the Predecessor year ended December 31, 2018 is analyzed below: Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 2018 Irish or Swiss Income Tax rate at 25.0 % and 7.83 %, respectively $ 454 $ 2 $ ( 299 ) $ 216 Tax on Operating Earnings/Losses Subject to Rates Different than the Irish or Swiss Federal Income Tax Rate ( 182 ) ( 65 ) 197 ( 387 ) Change in Valuation Allowance ( 330 ) 56 17 166 Change in Uncertain Tax Positions ( 27 ) ( 2 ) ( 18 ) ( 29 ) Estimated Tax on Settlement of Liabilities Subject to Compromise and Fresh Start Accounting — — ( 495 ) — Change in Valuation Allowance Attributed to Estimated Tax on Settlement of Liabilities Subject to Compromise and Fresh Start Accounting — — 463 — Provision for Income Taxes $ ( 85 ) $ ( 9 ) $ ( 135 ) $ ( 34 ) Our income tax provisions generally do not correlate to our consolidated income (loss) before tax. Our income taxes provisions are primarily driven by profits in certain jurisdictions, deemed profit countries and withholding taxes on intercompany and third-party transactions that do not directly correlate to ordinary income or loss. Impairments and other charges recognized do not result in significant tax benefit as a result of our inability to forecast realization of the tax benefit of such losses. Tax expense for the year ended December 31, 2020 includes $ 10 million to recognize valuation allowance in jurisdictions where we are no longer able to forecast taxable income. Weatherford International plc – 2020 Form 10-K | 85 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Our results for the 2019 Predecessor period include $ 32 million of tax expense related to the Fresh Start accounting impacts and $ 14 million of tax benefit primarily related to goodwill and other asset impairments and write downs. We also recognized $ 4.3 billion gain on Settlement of Liabilities Subject to Compromise as a result of the bankruptcy (See “Note 3 – Fresh Start Accounting”) with no tax impact due to it being attributed to Bermuda, which has no income tax regime, and the U.S., which resulted in the reduction of our U.S. unbenefited net operating losses carryforward under the operative tax statute and applicable regulations offset by the release of the valuation allowance. Prepetition charges (charges prior to Petition Date) and reorganization items (charges after Petition Date) had no significant tax impact. Our results for the 2018 Predecessor period include charges with $ 70 million tax benefit principally related to the$ 1.9 billion goodwill impairment. Other significant 2018 charges did not result in significant tax benefit. Deferred tax assets and liabilities are recognized for the estimated future tax effects of temporary differences between the tax basis of an asset or liability and its reported amount in the Consolidated Financial Statements. The measurement of deferred tax assets and liabilities is based on enacted tax laws and rates currently in effect in each of the jurisdictions in which we have operations. The components of the net deferred tax asset (liability) were as follows: December 31, December 31, (Dollars in millions) 2020 2019 Deferred Tax Assets: Net Operating Losses Carryforwards $ 881 $ 696 Unused Recognized Built in Losses 39 — Accrued Liabilities and Reserves 175 155 Tax Credit Carryforwards 11 11 Employee Benefits 30 26 Property, Plant and Equipment 129 63 Inventory 52 67 U.S. Interest Deferral 55 56 State Deferred 84 87 Other Differences between Financial and Tax Basis 92 121 Valuation Allowance ( 1,499 ) ( 1,166 ) Total Deferred Tax Assets 49 116 Deferred Tax Liabilities: Intangible Assets ( 45 ) ( 66 ) Other Differences between Financial and Tax Basis ( 4 ) ( 55 ) Total Deferred Tax Liabilities ( 49 ) ( 121 ) Net Deferred Tax Asset (Liability) $ — $ ( 5 ) We record deferred tax assets for net operating losses and temporary differences between the book and tax basis of assets and liabilities that are expected to produce tax deductions in future periods. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those deferred tax assets would be deductible. The Company assesses the realizability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) when determining whether a valuation allowance is required. The Company evaluates possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies, and the impact of fresh start accounting in making this assessment. The realizability of the deferred tax assets is dependent upon judgments and assumptions inherent in the determination of future taxable income, including factors such as future operation conditions (particularly as related to prevailing oil prices and market demand for our products and services). The increase in the valuation allowance in 2020 is primarily attributable to an increase of un-benefited net operating loss carryforwards, primarily attributed to jurisdictions where those losses are not expected to be realized. Weatherford International plc – 2020 Form 10-K | 86 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Deferred income taxes generally have not been recognized on the cumulative undistributed earnings of our non-Irish subsidiaries because they are considered to be indefinitely reinvested. Distribution of these earnings in the form of dividends or otherwise may result in a combination of income and withholding taxes payable in various countries. As of December 31, 2020, the pool of positive undistributed earnings of our non-Irish subsidiaries that are considered indefinitely reinvested and may be subject to tax if distributed amounts to approximately $ 1.3 billion. Due to complexities in the tax laws and the manner of repatriation, it is not practicable to estimate the unrecognized amount of deferred income taxes and the related dividend withholding taxes associated with these undistributed earnings. At December 31, 2020, we had approximately $ 5.6 billion of NOLs in various jurisdictions, $ 2.0 billion of which were generated by certain U.S. subsidiaries. We estimate that the maximum U.S. NOLs available for utilization in the future is $ 639 million as a result of the tax consequences of our emergence from bankruptcy as described below. As a result of our emergence on December 13, 2019, in the U.S. approximately $ 480 million of cancellation of indebtedness (COD) income was realized for tax purposes. Under exceptions applying to COD income resulting from a bankruptcy reorganization, the U.S. subsidiaries were not required to recognize this COD income currently as taxable income. Instead, the company’s US net operating losses were reduced under the operative tax statute and applicable regulations, affecting the balance of deferred taxes. The Company also realized COD income attributable to Bermuda, which does not have an income tax regime. As a result, there was no impact from the COD Income. Additionally, upon emergence our U.S. subsidiaries experienced an ownership change as the Company’s emergence was considered an “ownership change” for purposes of Internal Revenue Code section 382. The Internal Revenue Code sections 382 and 383 impose limitations on the ability of a company to utilize tax attributes after experiencing an “ownership change.” As a result, we have estimated our annual limitation is approximately $ 23 million against the utilization of our U.S. loss carryforwards and other tax attributes, including unused recognized built-in losses and U.S. interest deferral. The annual limitation will result in approximately $ 1.2 billion of our U.S. loss carryforwards expiring unused. Upon emergence, we decreased our NOL deferred tax asset and also decreased our valuation allowance each by $ 257 million to remove these lost NOLs. Our non-indefinite loss carryforwards, if not utilized, will mostly expire for U.S. subsidiaries from 2030 through 2037 and at various dates from 2020 through 2039 for non-U.S. subsidiaries. At December 31, 2020, we had $ 11 million of tax credit carryovers, all of which are related to our non-U.S. subsidiaries. A tabular reconciliation of the total amounts of uncertain tax positions at the beginning and end of the period is as follows: Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 2018 Balance at Beginning of Year $ 214 $ 213 $ 195 $ 217 Additions as a Result of Tax Positions Taken During a Prior Period 9 — 34 31 Reductions as a Result of Tax Positions Taken During a Prior Period ( 4 ) — ( 1 ) ( 9 ) Additions as a Result of Tax Positions Taken During the Current Period 21 2 17 14 Reductions Relating to Settlements with Taxing Authorities ( 2 ) ( 1 ) ( 20 ) ( 18 ) Reductions as a Result of a Lapse of the Applicable Statute of Limitations ( 7 ) — ( 5 ) ( 23 ) Foreign Exchange Effects ( 9 ) — ( 7 ) ( 17 ) Balance at End of Year $ 222 $ 214 $ 213 $ 195 Weatherford International plc – 2020 Form 10-K | 87 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Substantially all of the uncertain tax positions, if recognized in future periods, would impact our effective tax rate. To the extent penalties and interest would be assessed on any underpayment of income tax, such amounts have been accrued and classified as a component of income tax expense and other non-current liabilities in the Consolidated Financial Statements in accordance with our accounting policy. We recorded an expense of $ 11 million, $ 1 million, $ 15 million, and $ 1 million in interest and penalty for Successor year ended December 31, 2020, the 2019 Successor and Predecessor Periods and the year ended December 31, 2018, respectively. The amounts in the table above exclude cumulative accrued interest and penalties of $ 89 million, $ 77 million and $ 60 million at December 31, 2020, 2019, and 2018, respectively, which are included in other liabilities. We are subject to income tax in many of the over 75 countries where we operate. As of December 31, 2020, the following table summarizes the tax years that remain subject to examination for the major jurisdictions in which we operate: Tax Jurisdiction Tax Years under Examination Canada 2012 - 2020 Mexico 2009 - 2020 Russia 2017 - 2020 Switzerland 2012 - 2020 United States 2017 - 2020 We are continuously under tax examination in various jurisdictions. We cannot predict the timing or outcome regarding resolution of these tax examinations or if they will have a material impact on our financial statements. As of December 31, 2020, we anticipate that it is reasonably possible that the amount of uncertain tax positions may decrease by up to $ 4 million in the next twelve months due to expiration of statutes of limitations, settlements and/or conclusions of tax examinations. 19. Disputes, Litigation and Legal Contingencies We are subject to lawsuits and claims arising out of the nature of our business. We have certain claims, disputes and pending litigation for which we do not believe a negative outcome is probable or for which we can only estimate a range of liability. It is possible, however, that an unexpected judgment could be rendered against us, or we could decide to resolve a case or cases, that would result in a liability that could be uninsured and beyond the amounts we currently have reserved and in some cases those losses could be material. If one or more negative outcomes were to occur relative to these cases, the aggregate impact to our financial condition could be material. Due to the COVID-19 pandemic, courts in many jurisdictions around the world have been temporarily closed for trials and hearings, which has resulted in delays in many of our litigation matters. Accrued litigation and settlements recorded in “Other Current Liabilities” on the accompanying Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019 were $ 43 million and $ 44 million, respectively. Shareholder Litigation GAMCO Shareholder Litigation On September 6, 2019, GAMCO Asset Management, Inc. (“GAMCO”), purportedly on behalf of itself and other similarly situated shareholders, filed a lawsuit asserting violations of the federal securities laws against certain then-current and former officers and directors of the Company. GAMCO alleges violations of Sections 10(b) and 20(b) of the Securities Exchange Act of 1934, and violations of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) based on allegations that the Company and certain of its officers made false and/or misleading statements, and alleged non-disclosure of material facts, regarding our business, operations, prospects and performance. GAMCO seeks damages on behalf of purchasers of the Company’s ordinary shares from October 26, 2016 through May 10, 2019. GAMCO’s lawsuit was filed in the United States District Court for the Southern District of Texas, Houston Division, and it is captioned GAMCO Asset Management, Inc. v. McCollum, et al., Case No. 4:19-cv-03363. The District Court Judge appointed Utah Retirement Systems (“URS”) as Lead Plaintiff, and on March 16, 2020, URS filed its Amended Complaint. URS added the Company as a defendant but dropped the claims against non-officer board members and all the claims under the Securities Act. The defendants filed their motion to dismiss on May 18, 2020, and plaintiffs filed their response on July 3, 2020. The defendants filed a reply brief on August 3, 2020, and now the Court will rule on the motion to dismiss. We cannot reliably predict the outcome of the claims, including the amount of any possible loss. Weatherford International plc – 2020 Form 10-K | 88 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Prior Shareholder Litigation In 2010, three shareholder derivative actions were filed, and in 2014 a fourth shareholder derivative action was filed, purportedly on behalf of the Company, asserting breach of duty and other claims against certain then-current and former officers and directors of the Company related to the United Nations oil-for-food program governing sales of goods into Iraq, the Foreign Corrupt Practices Act of 1977 and trade sanctions related to the U.S. government investigations disclosed in our SEC filings since 2007. Those shareholder derivative cases were filed in Harris County, Texas state court and consolidated under the caption Neff v. Brady, et al. , No. 2010040764 (collectively referred to as the “ Neff Case ”). Other shareholder demand letters covering the same subject matter were received by the Company in early 2014, and a fourth shareholder derivative action was filed, purportedly on behalf of the Company, also asserting breach of duty and other claims against certain then current and former officers and directors of the Company related to the same subject matter as the Neff Case . That case, captioned Erste-Sparinvest KAG v. Duroc-Danner, et al., No. 201420933 (Harris County, Texas) was consolidated into the Neff Case in September 2014. A motion to dismiss was granted May 15, 2015, and an appeal was filed on June 15, 2015. Following briefing and oral argument, on June 29, 2017, the Texas Court of Appeals denied in part and granted in part the shareholders’ appeal. The Court ruled that the shareholders lacked standing to bring claims that arose prior to the Company’s redomestication to Switzerland in 2009 and upheld the dismissal of those claims. The Court reversed as premature the trial court’s dismissal of claims arising after the redomestication and remanded to the trial court for further proceedings. On February 1, 2018, the individual defendants and nominal defendant Weatherford filed a motion for summary judgment on the remaining claims in the case. On February 13, 2018, the trial court dismissed with prejudice certain directors for lack of jurisdiction. Although the plaintiffs appealed the jurisdictional ruling, on June 19, 2020, the plaintiffs filed a motion to dismiss the appeal with prejudice. This litigation has concluded. Rapid Completions and Packers Plus Litigation Several subsidiaries of the Company are defendants in a patent infringement lawsuit filed by Rapid Completions LLC (“RC”) in U.S. District Court for the Eastern District of Texas on July 31, 2015. RC claims that we and other defendants are liable for infringement of seven U.S. patents related to specific downhole completion equipment and the methods of using such equipment. These patents have been assigned to Packers Plus Energy Services, Inc., a Canadian corporation (“Packers Plus”), and purportedly exclusively licensed to RC. RC is seeking a permanent injunction against further alleged infringement, unspecified damages for infringement, supplemental and enhanced damages, and additional relief such as attorneys’ fees. The Company has filed a counterclaim against Packers Plus, seeking declarations of non-infringement, invalidity, and unenforceability of the four patents that remain asserted against the Company on the grounds of inequitable conduct. The Company is seeking attorneys’ fees and costs incurred in the lawsuit. The litigation was stayed, pending resolution of inter partes reviews (“IPR”) of each of the four patents before the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office (“USPTO”). The PTAB issued decisions during 2018 and 2019 finding that all the claims of the asserted patents challenged by the Company in the IPRs were invalid. RC appealed those decisions to the Federal Circuit, which issued a decision affirming the PTAB’s decision that the patents are invalid on January 21, 2020. The litigation in the U.S. has concluded. On October 14, 2015, Packers Plus and RC filed suit in Federal Court in Toronto, Canada against the Company and certain subsidiaries alleging infringement of a related Canadian patent and seeking unspecified damages and an accounting of the Company’s profits. Trial on the validity of the Canadian patent was completed in March 2017. On November 3, 2017, the Federal Court issued its decision, wherein it concluded that the defendants proved that the patent-in-suit was invalid and dismissed Packers Plus and RC’s claims of infringement. On January 5, 2018, Packers Plus and RC filed their Notice of Appeal. The appeal was dismissed in favor of Weatherford. Packers Plus and RC filed an Application for Leave to the Supreme Court of Canada requesting that the Supreme Court hear their appeal from the appellate court’s decision, but the Supreme Court dismissed the Application, thus concluding the litigation. Environmental Contingencies We have obligations and expect to incur capital, operating and maintenance, and remediation expenditures, as a result of compliance with environmental laws and regulations. Among those obligations, are the current requirements imposed by the Texas Commission on Environmental Quality (“TCEQ”) at the former Universal Compression facility in Midland, Texas. At this location we are performing a TCEQ-approved Remedial Action Plan (“RAP”) to address contaminated ground water. The performance of the RAP and related expenses are scheduled to be performed over a ten to twenty-year period and, may cost as much as $ 6 million, which is recorded as undiscounted obligation on the Consolidated Balance Sheets as of December 31, Weatherford International plc – 2020 Form 10-K | 89 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 2020. We continuously monitor and strive to maintain compliance with changes in laws and regulations that impact our business. 20. Shareholders’ Equity (Deficiency) Changes in our ordinary shares issued were as follows: (Shares in millions) Issued Balance at December 31, 2018 (Predecessor) 1,002 Equity Awards Granted, Vested and Exercised 7 Predecessor Shares Cancellation ( 1,009 ) Balance at December 13, 2019 (Predecessor) — Share Issuance 70 Balance at December 13, 2019 (Successor) 70 Share Issuance — Balance at December 31, 2019 (Successor) 70 Share Issuance — Balance at December 31, 2020 (Successor) 70 Upon the effectiveness of the Plan, all previously issued and outstanding equity interests in the Predecessor were cancelled and the Company issued 69,999,954 “New Ordinary Shares” to the holders of the Company’s existing senior notes and holders of “Old Ordinary Shares”. The amount in excess of par value of $ 2.9 billion is reported in “Capital in Excess of Par Value ” on the accompanying Consolidated Balance Sheets. On the Effective Date, the Company issued New Warrants to holders of the Company’s Old Ordinary Shares, to purchase up to an aggregate of 7,777,779 New Ordinary Shares in the Company, par value $0.001, at an exercise price of $ 99.96 per ordinary share. The New Warrants are equity classified and, upon issuance, have a value of $ 31 million, which was recorded in “Capital in Excess of Par Value.” The warrant fair value was a Level 2 valuation and is estimated using the Black Scholes valuation model. Inputs to the model include Weatherford’s share price, volatility of our share price, and the risk-free interest rate. The New Warrants are exercisable until “Expiration Date” of which is the earlier of (i) December 13, 2023 and (ii) the date of consummation of any liquidity event resulting in the sale or exchange of all or substantially all of the equity interests of the Company to one or more third parties (whether by merger, sale, recapitalization, consolidation, combination or otherwise) or the sale, directly or indirectly, by the Company of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole; or a liquidation, dissolution or winding up of the Company. All unexercised New Warrants will expire, and the rights of the warrant holders to purchase New Ordinary Shares will terminate, on the Expiration Date. During 2020, an immaterial number of warrants were exercised. Weatherford International plc – 2020 Form 10-K | 90 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Accumulated Other Comprehensive Loss The following table presents the changes in our accumulated other comprehensive loss by component: (Dollars in millions) Currency Translation Adjustment Defined Benefit Pension Deferred Loss on Derivatives Total Balance at December 31, 2018 (Predecessor) $ ( 1,724 ) $ ( 14 ) $ ( 8 ) $ ( 1,746 ) Other Comprehensive Income (Loss) before Reclassifications 52 ( 12 ) — 40 Reclassifications — 1 8 9 Net Activity 52 ( 11 ) 8 49 Balance at December 13, 2019 (Predecessor) $ ( 1,672 ) $ ( 25 ) $ — $ ( 1,697 ) Elimination of Predecessor Equity Balances 1,672 25 — 1,697 Balance at December 13, 2019 (Successor) $ — $ — $ — $ — Other Comprehensive Income 7 2 — 9 Balance at December 31, 2019 (Successor) $ 7 $ 2 $ — $ 9 Other Comprehensive Income ( 38 ) ( 14 ) — ( 52 ) Balance at December 31, 2020 (Successor) $ ( 31 ) $ ( 12 ) $ — $ ( 43 ) Weatherford International plc – 2020 Form 10-K | 91 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 21. Share-Based Compensation As part of the emergence from bankruptcy, outstanding awards under all Predecessor equity incentive plans were cancelled, and the 2019 Plan was approved by the Successor. The 2019 Plan was amended and restated in 2020. The share-based compensation plan permits the grant of options, share appreciation rights, restricted share awards, restricted share units, and other share-based and performance-based awards to any employee, consultant or non-employee director. The provisions of each award vary based on the type of award granted and are determined by the Compensation and Human Resources Committee of our Board of Directors. Restricted share units and performance-based share units granted and vested during 2020 were immaterial. As of December 31, 2020, we had 8 million shares available for grant under our Successor share-based compensation plan. Share-based compensation expense was immaterial and zero in the 2020 and 2019 Successor Periods, respectively. During the 2019 and 2018 Predecessor periods, we recognized $ 46 million (which included the acceleration of share-based compensation described at “Note 3 – Fresh Start Accounting and recorded in “Impairments and Other Charges” on the accompanying Consolidated Statements of Operations) and $ 47 million, respectively, recorded in “Selling, General and Administrative” on the accompanying Consolidated Statements of Operations. 22. Earnings per Share Basic earnings (loss) per share for all periods presented equals net income (loss) divided by our weighted average shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by our weighted average shares outstanding during the period including potential dilutive ordinary shares. The following table presents our basic and diluted weighted average shares outstanding and loss per share : Successor Predecessor Period From Period From Year 12/14/19 1/1/2019 Year Ended through through Ended (Shares in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Net Income (Loss) Attributable to Weatherford $ ( 1,921 ) $ ( 26 ) $ 3,661 $ ( 2,811 ) Basic and Diluted Weighted Average Shares Outstanding 70 70 1,004 997 Basic and Diluted Income (Loss) Per Share Attributable to Weatherford $ ( 27.44 ) $ ( 0.37 ) $ 3.65 $ ( 2.82 ) Our basic and diluted weighted average shares outstanding for the 2020 and 2019 Successor Periods are equivalent due to the net loss attributable to shareholders. Diluted weighted average shares for the 2020 and 2019 Successor Periods exclude 8 million potential ordinary shares. Our basic and diluted weighted average shares outstanding for the 2019 Predecessor Period are equivalent as we believe including the dilutive impact of our Predecessor potential shares would not be meaningful as the potential shares were cancelled pursuant to the terms of the Plan. Our basic and diluted weighted average shares outstanding for the 2018 Predecessor Period are equivalent due to the net loss attributable to shareholders. Diluted weighted average shares outstanding for the 2019 and 2018 Predecessor Periods exclude 197 million and 251 million potential ordinary shares, respectively, for restricted share units, performance units, exchangeable senior notes and warrants outstanding. Weatherford International plc – 2020 Form 10-K | 92 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 23. Revenues Disaggregated Revenue by Product Line and Geographic Region Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services. During the second quarter of 2020, in order to support the streamlining and realignment of the business, we combined our prior reported four product lines into two product lines, and all prior periods have been retrospectively recast to conform to this new presentation. Our two product lines are as follows: (1) Completion and Production and (2) Drilling, Evaluation and Intervention. The unmanned equipment that we lease to customers as operating leases consists primarily of drilling rental tools (in the Drilling, Evaluation and Intervention product line) and artificial lift pumping equipment (in the Completion and Production product line). These equipment rental revenues are generally provided based on call-out work orders that include fixed per unit prices and are derived from short-term contracts. The following tables disaggregate our revenues from contracts with customers by major product line and geographic region and includes equipment rental revenues recognized under Accounting Standards Update No. 2016-02, Leases (Topic 842). Equipment revenues recognized was $ 150 million and $ 12 million in the 2020 and 2019 Successor Periods, respectively, and $ 284 million and $ 337 million in the 2019 and 2018 Predecessor Periods, respectively. Revenues in the U.S. were $ 720 million and $ 59 million in the 2020 and 2019 Successor Periods, respectively, and $ 1.3 billion and $ 1.6 billion in the 2019 and 2018 Predecessor Periods, respectively. We had no revenue in our country of domicile (Ireland) in the 2020 and 2019 Successor Periods, and the 2019 and 2018 Predecessor Periods. Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Product Line Revenue by Hemisphere: Completion and Production $ 859 $ 69 $ 1,357 $ 1,709 Drilling, Evaluation and Intervention 727 52 1,263 1,354 Western Hemisphere $ 1,586 $ 121 $ 2,620 $ 3,063 Completion and Production $ 1,020 $ 67 $ 975 $ 965 Drilling, Evaluation and Intervention 1,079 73 1,359 1,716 Eastern Hemisphere $ 2,099 $ 140 $ 2,334 $ 2,681 Total Revenues $ 3,685 $ 261 $ 4,954 $ 5,744 Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Revenue by Geographic Areas: North America $ 889 $ 68 $ 1,548 $ 1,987 Latin America 697 53 1,072 1,076 Western Hemisphere $ 1,586 $ 121 $ 2,620 $ 3,063 Middle East & North Africa and Asia $ 1,352 $ 88 $ 1,427 $ 1,716 Europe/Sub-Sahara Africa/Russia 747 52 907 965 Eastern Hemisphere $ 2,099 $ 140 $ 2,334 $ 2,681 Total Revenues $ 3,685 $ 261 $ 4,954 $ 5,744 Weatherford International plc – 2020 Form 10-K | 93 Table of Contents Item 8 | Notes to the Consolidated Financial Statements Contract Balances The following table provides information about receivables for product and services included in “Accounts Receivable, Net,” “Contract Assets” and “Contract Liabilities” on our Consolidated Balance Sheets at December 31, 2020 and December 31, 2019. (Dollars in millions) 12/31/2020 12/31/2019 Receivables for Product and Services in Accounts Receivable, Net $ 792 $ 1,156 Receivables for Equipment Rentals in Account Receivable, Net $ 34 $ 85 Contract Assets included in Other Current Assets $ 7 $ 3 Contract Liabilities included in Other Current Liabilities $ 37 $ 12 Revenue recognized for the year ended December 31, 2020 and 2019 that were included in the contract liabilities balance at the beginning of each year was $ 10 million and $ 61 million, respectively. The increase in contract liabilities was due to advance payments on new or amended contract awards. Included in the activity for 2019 was a fresh start adjustment of $ 29 million, which reduced contract liabilities. Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. In the following table, estimated revenue expected to be recognized in the future related to performance obligations that are either unsatisfied or partially unsatisfied as of December 31, 2020 primarily relate to subsea services contracts. All consideration from contracts with customers is included in the amounts presented below. (Dollars in millions) 2021 2022 2023 2024 Thereafter Total Service revenue $ 32 $ 37 $ 39 $ 40 $ 54 $ 202 Weatherford International plc – 2020 Form 10-K | 94 Table of Contents Item 8 | Notes to the Consolidated Financial Statements 24. Segment Information Reporting Segments The Company’s chief operating decision maker (its chief executive officer) regularly reviews information by our two reportable segments, which are our Western Hemisphere and Eastern Hemisphere segments. These reportable segments are based on management’s organization and view of Weatherford’s business when making operating decisions, allocating resources and assessing performance. Research and development expenses are included in the results of our Western and Eastern Hemisphere segments. Our corporate and other expenses that do not individually meet the criteria for segment reporting are reported separately on the caption Corporate. Financial information by segment is summarized below. Revenues are attributable to countries based on the ultimate destination of the sale of products or performance of services and was further described in “Note 23 – Revenues.” The accounting policies of the segments are the same as those described in “Note 1 – Summary of Significant Accounting Policies.” Successor Predecessor Period From Period From 12/14/2019 1/1/2019 Year Ended through through Year Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Revenue: Western Hemisphere $ 1,586 $ 121 $ 2,620 $ 3,063 Eastern Hemisphere 2,099 140 $ 2,334 $ 2,681 Total Revenue $ 3,685 $ 261 $ 4,954 $ 5,744 Operating Income (Loss): Western Hemisphere $ 18 $ ( 4 ) $ 54 $ 208 Eastern Hemisphere 37 10 134 119 Total Segment Operating Income $ 55 $ 6 $ 188 $ 327 Corporate ( 111 ) ( 5 ) ( 118 ) ( 130 ) Impairments and Other Charges (a) ( 1,236 ) — ( 1,104 ) ( 2,155 ) Restructuring Charges (b) ( 206 ) — ( 189 ) ( 126 ) Prepetition Charges (c) — — ( 86 ) — Gain on Operational Assets Sale 12 — 15 — Gain on Sale of Businesses, Net (d) — — 112 — Total Operating Income (Loss) $ ( 1,486 ) $ 1 $ ( 1,182 ) $ ( 2,084 ) Interest Expense, Net ( 266 ) ( 12 ) ( 362 ) ( 614 ) Reorganization Items (c) ( 9 ) ( 4 ) 5,389 — Other Expense, Net ( 53 ) — ( 26 ) ( 59 ) Income (Loss) Before Income Taxes $ ( 1,814 ) $ ( 15 ) $ 3,819 $ ( 2,757 ) Depreciation and Amortization: Western Hemisphere $ 134 $ 14 $ 171 $ 216 Eastern Hemisphere 369 20 269 333 Corporate — — 7 7 Total $ 503 $ 34 $ 447 $ 556 (a) See “Note 4 – Impairments and Other Charges”, “Note 10 – Long-Lived Asset Impairments” and “Note 11 – Goodwill and Intangible Assets” for additional information. (b) See “Note 12 – Restructuring Charges” for additional information. (c) See “Note 2 – Emergence from Chapter 11 Bankruptcy Proceedings” for additional information. Weatherford International plc – 2020 Form 10-K | 95 Table of Contents Item 8 | Notes to the Consolidated Financial Statements (d) Primarily includes the gain on sale of our reservoir solutions business. See “Note 8 – Business Combinations and Divestitures” for additional information. Successor Predecessor Period From Period From Year 12/14/2019 1/1/2019 Year Ended through through Ended (Dollars in millions) 12/31/2020 12/31/2019 12/13/2019 12/31/2018 Capital Expenditures: Western Hemisphere $ 79 $ 9 $ 113 $ 81 Eastern Hemisphere 59 7 115 87 Corporate 16 4 22 18 Total $ 154 $ 20 $ 250 $ 186 The following table presents total assets by segment: December 31, (Dollars in millions) 2020 2019 Western Hemisphere $ 1,636 $ 2,514 Eastern Hemisphere 3,089 4,392 Corporate 709 387 Total $ 5,434 $ 7,293 Long-lived Assets by Geographic Areas Long-lived assets by geographic area within the segments are summarized below and exclude goodwill and intangible assets (see “Note 11 – Goodwill and Intangible Assets” for additional details) as well as deferred tax assets of $ 15 million and $ 39 million at December 31, 2020 and December 31, 2019, respectively. Long-lived assets were zero in our country of domicile (Ireland) and in the U.S. were $ 306 million and $ 532 million as of December 31, 2020 and December 31, 2019, respectively. December 31, (Dollars in millions) 2020 2019 North America $ 435 $ 753 Latin America 174 296 Western Hemisphere $ 609 $ 1,049 Middle East & North Africa and Asia $ 482 $ 715 Europe/Sub-Sahara Africa/Russia 344 684 Eastern Hemisphere $ 826 $ 1,399 Total $ 1,435 $ 2,448 Weatherford International plc – 2020 Form 10-K | 96 Table of Contents Item 9 | Changes in and Disagreement with Accountants on Accounting and Financial Disclosure Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure None.